Which of the following is/are correct? Please select the appropriate option. i.    When RBI expects that prices of commodities are increasing, as a monetary measure RBI may cut the CRR or Repo rate ii.   When there is excess volatility in the foreign exchange market, RBI will keep its forex reserve intact iii.  RBI started Asset Quality Review (AQ

Solution

1.   In case of price rise (high inflation) RBI increases CRR or repo which will decrease money supply and tame inflation. 2.    In case of volatility in forex market, RBI intervene and depending on the sale/purchase that will increase of decrease forex reserves 3.    RBI initiated the Asset Quality Review of banks in the second half of 2015 because about 1/6^th of the public sector banks’ gross advances are stressed (non-performing, restructured or written-off), and a significant majority of these are in fact non-performing assets (NPAs). This estimate of stressed assets has doubled from 2013 in terms of what had been recognized by banks. The stressed assets are mostly comprised of loans to businesses sectors such as infrastructure, power, telecom, metals (iron and steel, in particular), engineering-procurement-construction (EPC), and textiles.