Question

Given below are two statements:
• [Statement (I):] Agricultural credit review committee, 1989 was set up by RBI under the chairmanship of A.M Khusro. 
• [Statement (II):] Repo rate is the rate at which RBI borrows money from banks. 
In light of the above statements, choose the most appropriate answer from the options given below. 
 

• A. Both Statement (I) and Statement (II) are correct.
• B. Both Statement (I) and Statement (II) are incorrect.
• C. Statement (I) is correct but Statement (II) is incorrect.
• D. Statement (I) is incorrect but Statement (II) is correct.

Hint:

To distinguish between central bank interest rates:
- Repo Rate: RBI lends to commercial banks (controls inflation).
- Reverse Repo Rate: RBI borrows from commercial banks (absorbs excess liquidity).

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Agricultural credit policies and central banking instruments are designed to regulate money supply, direct institutional credit, and support rural development in India.

Step 2: Detailed Explanation:
Let us evaluate both statements:
- Statement (I) is correct: The Reserve Bank of India (RBI) established the Agricultural Credit Review Committee (ACRC) in 1989 under the chairmanship of noted economist Prof. A.M. Khusro.
The committee evaluated the agricultural credit system, analyzed the performance of rural financial institutions, and recommended structural reforms to improve credit flow to farmers.
- Statement (II) is incorrect: The Repo Rate (Repurchase Rate) is the interest rate at which the central bank (RBI) lends money to commercial banks against government securities.
This rate is used to inject short-term liquidity into the banking system.
The rate at which the RBI borrows surplus money from commercial banks is called the Reverse Repo Rate.
Therefore, Statement (I) is correct, but Statement (II) is incorrect.

Step 3: Final Answer:
Statement (I) is correct but Statement (II) is incorrect, matching Option (C).