MCQ Questions (1 Mark)

Economics
Chapter 1 Class 8 Economics - Introduction to Banks

## Which institution sets the interest rates on deposits that banks pay to their customers?

### D. Federal Reserve System (Fed)

So, the correct answer is option (C) :Reserve Bank of India (RBI) .

### Detailed Explanation by Teachoo

Let’s check all the options and see why they are correct or not:

• Option (A) World Bank - The World Bank is an international financial institution that provides loans and grants to developing countries for various projects and programs. It does not set the interest rates on deposits that banks pay to their customers in India. So, this is incorrect .

• Option (B) International Monetary Fund (IMF) - The IMF is another international financial institution that provides loans and advice to countries facing economic difficulties or crises. It also does not set the interest rates on deposits that banks pay to their customers in India. So, this is incorrect .

• Option (C) Reserve Bank of India (RBI) - The RBI is the central bank of India that sets the interest rates on deposits that banks pay to their customers in India. It does this as part of its function of controlling the money supply and interest rates in the economy. So, this is correct .

• Option (D) Federal Reserve System (Fed) - The Fed is the central bank of the United States of America that performs similar functions as the RBI in India. It sets the interest rates on deposits that banks pay to their customers in the USA, not in India. So, this is incorrect .

Thus, option (C) is correct .

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