UPSC Prelims 1995 · General Studies
Question 27: Economy and Social Development
As part of the liberalisation programme and with a view to attracting foreign exchange, the Government and the RBI have devised two schemes known as FCNR-‘A’ and FCNR-‘B’. Which of the following is/are true regarding these two schemes? I. Under scheme ‘A’ RBI bears exchange rate fluctuations. II. Under scheme ‘B’, other banks are to meet out the difference in exchange rate fluctuations. III. Both the schemes stand withdrawn now. IV. Only scheme ‘A’ has been withdrawn. Select the correct answer from the codes given below:
AnswerThe answer is (d).
FCNR(A) accounts, begun in 1975, were foreign-currency deposits of non-resident Indians on which the RBI bore the exchange-rate risk; the scheme was withdrawn in 1994. FCNR(B), begun in 1993, leaves the exchange risk with the banks that accept the deposits, and it continues. So statements I, II and IV fit, and III is wrong because scheme B still runs. Remember: A withdrawn, B continues.
- I. Under FCNR(A) the RBI bore the exchange-rate risk.
- II. Under FCNR(B) the banks bear the exchange-rate difference.
- III. FCNR(B) was not withdrawn.
- IV. Only scheme A was withdrawn.
Why each option is right or wrong
- (a) III is wrong, since FCNR(B) was not withdrawn.
- (b) I and II are true, but IV, that only scheme A was withdrawn, is also true, so this is incomplete.
- (c) Includes III, which is wrong: scheme B continues.
- (d) Right: I, II and IV.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 1995, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.