Economics • Banking & FinanceHard
Analyze the transmission mechanism of monetary policy in the hill economy of Uttarakhand, where credit-deposit ratios in remote hill districts are historically lower than in plain districts. What is the primary structural impediment causing this disparity?
A. Excessive proliferation of high-frequency trading algorithmic firms in remote valleys
B. Absence of viable private corporate investment projects, limited collateralizable land titles due to strict land alienation laws in hill areas, and risk aversion among institutional lenders✓ Correct Answer
C. Statutory prohibition of commercial banking operations in districts above 2000 meters altitude
D. Mandatory requirement that all bank deposits be held exclusively in gold bullions
💡 Solution & Explanation
Low credit-deposit ratios in the hill districts of Uttarakhand stem from a scarcity of bankable industrial projects, small landholding sizes with restrictions on land transfer under state land laws limiting collateral security, and cautious lending practices by commercial banks. Consequently, local savings mobilized in hills are often channeled into investments elsewhere. Targeted credit camps and Mudra loan drives attempt to bridge this credit gap.
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