If the RBI observes a persistent liquidity surplus in the banking system in July 2026, what action would it typically take to manage it?
A Conducting reverse repo operations under LAF to absorb liquidity.
B Reducing the Cash Reserve Ratio (CRR) for banks.
C Lowering the Statutory Liquidity Ratio (SLR) for banks.
D Encouraging banks to increase lending without any intervention.
Answer: A
To absorb excess liquidity, the RBI typically uses reverse repo operations under the LAF, where banks park their surplus funds with the RBI and earn interest, effectively withdrawing liquidity from the system.
32.
Which of the following tools is MOST LIKELY being used by the RBI in July 2026 to manage systemic liquidity, given the current economic conditions?
A Long-term infrastructure bonds issued by the government.
B Open Market Operations (OMOs) and Liquidity Adjustment Facility (LAF) repo/reverse repo operations.
C Direct cash transfers to citizens.
D Issuance of new currency notes.
Answer: B
OMOs and LAF operations (including repo and reverse repo) are the primary, day-to-day tools used by the RBI to inject or absorb liquidity from the banking system, thereby influencing short-term interest rates and managing systemic liquidity.
33.
In July 2026, the Reserve Bank of India (RBI) has been actively managing liquidity in the banking system. What is the primary objective of RBI's liquidity management operations?
A To deliberately create a liquidity deficit to push up interest rates.
B To ensure adequate liquidity to meet the economy's credit needs and maintain financial stability.
C To absorb all excess liquidity to prevent any potential asset bubbles.
D To exclusively manage the government's borrowing program.
Answer: B
The RBI's liquidity management aims to strike a balance, ensuring that there is enough liquidity for credit flow while preventing excessive liquidity that could fuel inflation or financial instability. This is crucial for supporting economic growth.
34.
Considering the retail inflation trends in July 2026, what is the likely implication for the RBI's monetary policy stance?
A A strong push towards aggressive rate cuts to stimulate growth.
B Maintaining a cautious approach, possibly keeping policy rates steady.
C An immediate increase in the repo rate to combat inflation.
D Shifting focus entirely to fiscal policy measures.
Answer: B
With inflation showing signs of moderation but still facing upside risks (like fuel prices), the RBI is likely to maintain a cautious monetary policy stance in July 2026, prioritizing price stability while assessing growth dynamics.
35.
The Reserve Bank of India (RBI) has been closely monitoring the Consumer Price Index (CPI) for July 2026. Which category within the CPI basket has shown persistent elevated levels, posing a challenge to the inflation target?
A Housing and Education.
B Clothing and Footwear.
C Health and Personal Care.
D Fuel and Light.
Answer: D
While food inflation has moderated, global energy market dynamics and domestic supply factors have kept 'Fuel and Light' prices at elevated levels in July 2026, contributing to overall inflation concerns.
36.
As of July 2026, what was the primary driver contributing to the recent moderation in India's retail inflation (CPI)?
A A significant increase in global crude oil prices.
B A sharp rise in food inflation, particularly vegetables and pulses.
C Easing of food price pressures and stable core inflation.
D Increased government spending on infrastructure projects.
Answer: C
As of July 2026, reports indicated that the moderation in CPI was largely due to a cooling down of food inflation, especially in categories like vegetables, and a relatively stable core inflation, which excludes volatile food and fuel prices.
37.
The expansion of digital payment infrastructure in India has also led to the growth of specific types of digital payment instruments. Which of the following has seen a significant surge in usage by July 2026?
A Paper cheques
B Demand Drafts
C Contactless payment cards and mobile wallets
D Money orders
Answer: C
By July 2026, contactless payment cards and mobile wallets have become extremely popular due to their convenience and speed, reflecting the broader trend of digital payment infrastructure expansion.
38.
As of July 2026, which payment system, developed by the National Payments Corporation of India (NPCI), has become a dominant force in facilitating instant retail payments across India?
A NEFT (National Electronic Funds Transfer)
B RTGS (Real-Time Gross Settlement)
C UPI (Unified Payments Interface)
D IMPS (Immediate Payment Service)
Answer: C
Unified Payments Interface (UPI) has revolutionized digital payments in India, enabling seamless, real-time transactions between bank accounts on mobile devices, and has seen massive adoption by July 2026.
39.
Which of the following initiatives, launched by the Indian government, has significantly contributed to the expansion of digital payment infrastructure in India by July 2026?
A National Rural Employment Guarantee Act (NREGA)
B Pradhan Mantri Jan Dhan Yojana (PMJDY)
C Make in India
D Swachh Bharat Abhiyan
Answer: B
The Pradhan Mantri Jan Dhan Yojana (PMJDY) has been instrumental in expanding financial inclusion, providing bank accounts to millions, which forms the bedrock for digital payment adoption and infrastructure.
40.
The RBI Monetary Policy Committee, in its July 2026 meeting, maintained its stance on the monetary policy. What was this stance?
A Accommodative
B Neutral
C Withdrawal of accommodation
D Hawkish
Answer: C
In July 2026, the RBI MPC maintained its stance of 'withdrawal of accommodation' to ensure that inflation progressively aligns with the target while supporting growth.
