The major concerns associated with ineffective policy transmission are i Uncertainty in busines...........

Economic and Social Issues Nature of Indian economy

The State Bank of India Ltd announced the linking of savings bank account deposits and short-term loans to the RBI’s repo rate which may ensure faster monetary transmission. Monetary transmission refers to the process by which a central bank’s monetary policy signals (like repo rate) are passed on, through financial system to influence the businesses and households. In India, policy rate changes by RBI are not reflected in the base rates of banks regularly. While rate hikes are passed on immediately, but same is not witnessed in rate cuts by the RBI. This shows there is a lag in monetary transmission.

The major concerns associated with ineffective policy transmission are:

i.Uncertainty in business cycle

ii.Negative signals to the investors

iii.Ineffectiveness of fiscal policy

iv.Double financial repression

i, ii and iv only

i, iii and iv only

i and ii only

i, ii and iii only

None of these

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Explanation:

The major concerns which are related to ineffective policy transmission are the following :

Uncertainties in business cycle-here major companies are not able to take decisions with predictable policy cycle.
Negative signals to the investors -which are otherwise tempted to invest in India due to its favorable interest eco-system.
Ineffectiveness of Fiscal Policy-whereby government incentives like subsidies, interest subventions do not remain attractive as banks do not respond to policy signals.