UPSC Prelims 2010 · General Studies

Question 50: Economy and Social Development

In India, the interest rate on savings accounts in all the nationalized commercial banks is fixed by

aUnion Ministry of Finance

bUnion Finance Commission

cIndian Banks’ Association

dNone of the above

AnswerThe answer is (d).

In 2010 the Reserve Bank of India fixed the interest rate on savings bank deposits, so it was not the Ministry of Finance, the Finance Commission or the Indian Banks' Association. The Finance Commission deals with revenue sharing between the Centre and states, and the IBA is an association of banks. Since October 2011 the RBI has left the savings rate to banks, which now set it themselves.

Why each option is right or wrong

(a) The Finance Ministry does not fix savings rates.
(b) The Finance Commission deals with sharing of revenues between the Union and states.
(c) The IBA is an association of banks and does not fix the rate.
(d) Right: none of these; the RBI fixed it then, and banks set it now.

Worth knowing: Since October 2011 banks set savings rates themselves, so (d) still holds but the RBI no longer fixes the rate.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2010, General Studies, Series A. The paper on upsc.gov.in.