10 Questions
What enabled the Government of India to prepay foreign currency loans?
High foreign exchange reserves and low domestic interest rates
How did the Government of India substitute the foreign debts with domestic debt?
By issuing government securities on a private placement basis to the RBI
What is the fiscal/monetary implication of the transactions mentioned in the text?
There are no fiscal/monetary implications as it is a substitution of external sovereign debt with domestic sovereign debt placed with RBI
What type of debt was used to substitute the foreign debts?
Domestic sovereign debt
What action did the Government of India take to prepay US $ 5.2 billion of foreign currency loans?
Outright purchase of foreign exchange from RBI
What role did the RBI play in the process of substituting foreign debts with domestic debt?
Receiving government securities through private placement
How do the low interest rates in domestic markets contribute to the prepayment of foreign currency loans?
They reduce the cost of borrowing for prepayment
What distinguishes the mentioned transactions from traditional fiscal/monetary implications?
They involve substitution of external sovereign debt with domestic sovereign debt placed with RBI
What was the purpose of issuing government securities on a private placement basis to the RBI?
To substitute foreign debts with domestic debt
How did India manage to prepay certain foreign currency loans?
By outright purchase of foreign exchange from RBI
Test your understanding of the monetary policy and liquidity management with this quiz. Explore the key indicators such as Bank Rate and Repo Rate, and learn about the operations and controls of the Liquidity Adjustment Facility (LAF).
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