Question : Assertion: All the commercial banks were set free to decide their own interest rate structure.
Reason: Under the reform process the role of RBI was shifted from facilitator to regulator.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Assertion is false, but the reason is true.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
The assertion is true. While there have been reforms to liberalize interest rates in India, not all commercial banks have complete freedom to set their own interest rates. The Reserve Bank of India (RBI) still plays a regulatory role in setting certain guidelines and benchmarks for interest rates.
The reason is incorrect because the RBI has always had a regulatory role in the banking sector. The reform process may have enhanced and expanded the regulatory functions of the RBI, but it did not result in a shift from being a facilitator to a regulator.
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