UPSC Prelims 2010 Q50: Indian Economy – Banking & Financial Sector
- (a) Union Ministry of Finance
- (b) Union Finance Commission
- (c) Indian Banks’ Association
- (d) None of the above
Answer: (d) None of the above
Explanation
Who fixes the savings-account interest rate in India
At the time of this question (pre-October 2011 deregulation), savings account interest rates were under specific regulatory control.
| Option | Verdict | Reason |
|---|---|---|
| (a) Union Ministry of Finance | Incorrect | The Finance Ministry does not directly set savings account interest rates |
| (b) Union Finance Commission | Incorrect | The Finance Commission deals with Centre-State fiscal transfers, unrelated to savings account rates |
| (c) Indian Banks' Association | Incorrect | IBA is an industry body for coordination, but it does not have the regulatory authority to fix this rate |
| (d) None of the above | Correct | At the time, savings account interest rates were actually fixed by the Reserve Bank of India, which is not listed among the given options, making 'none of the above' the correct choice |
Savings account rate regulation:
| Point | Detail |
|---|---|
| Actual regulator (pre-2011) | Reserve Bank of India |
| Not RBI's role | Ministry of Finance, Finance Commission, or IBA |
| Later change | Savings rates were deregulated in October 2011 |
Answer: (d) None of the above.
Why each option is right or wrong
- (a) Incorrect. The Finance Ministry is not the body that set this specific interest rate.
- (b) Incorrect. The Finance Commission deals with fiscal transfers, unrelated to this rate.
- (c) Incorrect. The Indian Banks' Association lacks the regulatory authority to fix this rate.
- (d) CORRECT. The actual regulator, the Reserve Bank of India, is not among the listed options, making 'none of the above' correct.
Key point
Before the October 2011 deregulation, the Reserve Bank of India fixed savings account interest rates — since RBI is not among the listed options, the correct answer is 'none of the above'.
Remember
Pre-2011 savings account interest rates: fixed by the RBI (not Finance Ministry, Finance Commission, or IBA) — hence 'none of the above' when RBI isn't listed.
Common mistakes
- Picking a plausible-sounding but incorrect body (Finance Ministry, Finance Commission, IBA) instead of recognising none of them is the real regulator.
- Not knowing the Reserve Bank of India's historical role in fixing savings account rates before deregulation.
- Missing that 'none of the above' can be the correct answer when the real answer is simply absent from the options.
Exam tip
Before October 2011, RBI fixed savings account rates — and since RBI isn't a listed option here, 'none of the above' is correct.
Sources
- Reserve Bank of India — Master Circular on Interest Rate on Deposits: deregulation of the savings bank deposit interest rate (25 October 2011)
- Reserve Bank of India — Annual Policy Statement 2011–12