{"id":39817,"date":"2024-04-26T13:25:37","date_gmt":"2024-04-26T13:25:37","guid":{"rendered":"https:\/\/edukemy.com\/blog\/?p=39817"},"modified":"2024-04-26T13:25:38","modified_gmt":"2024-04-26T13:25:38","slug":"upsc-prelims-2014-question-33","status":"publish","type":"post","link":"https:\/\/edukemy.com\/blog\/upsc-prelims-2014-question-33\/","title":{"rendered":"UPSC Prelims 2014 &#8211; Question 33"},"content":{"rendered":"\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<label for=\"ez-toc-cssicon-toggle-item-69e9340075a6b\" class=\"ez-toc-cssicon-toggle-label\"><p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e9340075a6b\"  \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/edukemy.com\/blog\/upsc-prelims-2014-question-33\/#Q_In_the_context_of_Indian_economy_which_of_the_following_isare_the_purposepurposes_of_%E2%80%98Statutory_Reserve_Requirements\" title=\"Q: In the context of Indian economy; which of the following is\/are the purpose\/purposes of \u2018Statutory Reserve Requirements\u2019?\">Q: In the context of Indian economy; which of the following is\/are the purpose\/purposes of \u2018Statutory Reserve Requirements\u2019?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/edukemy.com\/blog\/upsc-prelims-2014-question-33\/#The_Correct_Answer_is_1_only\" title=\"The Correct Answer is 1 only.\">The Correct Answer is 1 only.<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/edukemy.com\/blog\/upsc-prelims-2014-question-33\/#In_case_you_still_have_your_doubts_contact_us_on_9811333901\" title=\"In case you still have your doubts, contact us on 9811333901.&nbsp;\">In case you still have your doubts, contact us on 9811333901.&nbsp;<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/edukemy.com\/blog\/upsc-prelims-2014-question-33\/#Visit_our_YouTube_Channel_%E2%80%93_here\" title=\"Visit our YouTube Channel &#8211;&nbsp;here\">Visit our YouTube Channel &#8211;&nbsp;here<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Q_In_the_context_of_Indian_economy_which_of_the_following_isare_the_purposepurposes_of_%E2%80%98Statutory_Reserve_Requirements\"><\/span>Q: In the context of Indian economy; which of the following is\/are the purpose\/purposes of \u2018Statutory Reserve Requirements\u2019?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>a) To enable the Central Bank to control the amount of advances the banks can create<\/p>\n\n\n\n<p>b) To make the people\u2019s deposits with banks safe and liquid<\/p>\n\n\n\n<p>c) To prevent the commercial banks from making excessive profits<\/p>\n\n\n\n<p>d) To force the banks to have sufficient vault cash to meet their day-to-day requirements<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Correct_Answer_is_1_only\"><\/span>The Correct Answer is 1 only.<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Statutory Reserve Requirement<\/p>\n\n\n\n<ul class=\"has-normal-font-size wp-block-list\"><li>It is a quantitative monetary policy instrument to manage liquidity.<\/li><li>RBI requires commercial banks to keep reserves in order to ensure that banks have sufficient assets to draw on when account holders want to be paid. Hence, Statement 2 is not correct.<\/li><li>Cash Reserve Ratio is the fraction of their deposits that banks must keep with RBI to make the people&#8217;s deposits with banks safe and liquid.<\/li><li>When the central bank wants to increase the money supply in the economy, it lowers the reserve ratio. Hence it enables the Central Bank to control the number of advances the banks can create. Hence statement 1 is correct.<\/li><li>Reserve requirements are designed as \u201cprecautionary measures\u201d to control the economy and not to stop banks from \u201cexcessive\u201d profit and not to force the banks to have sufficient cash to meet their day-to-day requirements. Hence statement 3 and 4 is incorrect.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full is-resized\"><a href=\"https:\/\/edukemy.com\/upsc\/upsc-essay?utm_source=Blog&amp;utm_medium=Banner&amp;utm_campaign=Essay\" target=\"_blank\" rel=\"noreferrer noopener\"><img fetchpriority=\"high\" decoding=\"async\" src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2024\/06\/UPSC-Essay-Course-1280\u00d7300-1-3.svg\" alt=\"\" class=\"wp-image-42688\" width=\"781\" height=\"182\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"block-c6ab63ae-7083-4831-b519-cb89dacafb18\"><span class=\"ez-toc-section\" id=\"In_case_you_still_have_your_doubts_contact_us_on_9811333901\"><\/span><strong>In case you still have your doubts, contact us on 9811333901.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p id=\"block-52c5a91b-6ed6-46e3-b781-7cc0c63a0b76\">For UPSC Prelims Resources,&nbsp;<a href=\"https:\/\/edukemy.com\/upsc-cse-prelims-resource-centre\" target=\"_blank\" rel=\"noreferrer noopener\">Click here<\/a><\/p>\n\n\n\n<p id=\"block-d014fe86-d628-49d8-82ce-6c60dc6e7a73\">For Daily Updates and Study Material:<\/p>\n\n\n\n<p id=\"block-38177954-e668-4d8d-b250-d0fbd5a09390\">Join our Telegram Channel &#8211;&nbsp;<a href=\"https:\/\/t.me\/WithEdukemy4IAS\" target=\"_blank\" rel=\"noreferrer noopener\">Edukemy for IAS<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\" id=\"block-49ca2fe3-109f-4a88-b72e-9df49c3d328e\"><li>1. 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