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      Question

      Section 42 of the RBI Act, 1934 primarily deals with

      which of the following?
      A Assets of the Issue Department Correct Answer Incorrect Answer
      B Cash reserves of scheduled banks to be kept with the Bank Correct Answer Incorrect Answer
      C Liabilities of the Issue Department Correct Answer Incorrect Answer
      D Obligation to supply different forms of currency Correct Answer Incorrect Answer
      E Transactions in foreign exchange Correct Answer Incorrect Answer

      Solution

      Section 42 deals with cash reserves of scheduled banks to be kept with the Bank, commonly known as the Cash Reserve Ratio (CRR) provision. Every scheduled bank must maintain with the RBI an average daily balance of such per cent of its total demand and time liabilities as the Bank may notify. Failure attracts penal interest. Section 42 also governs inclusion in and exclusion from the Second Schedule. Hence Section 42 concerns cash reserves of scheduled banks.

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