Consider the following:1. Liquidity Adjustment Facility2. Open market operations3. Market Stabilisation Scheme4. Marginal Standing FacilityWhich of the above is/are components of Monetary Policy?a)1 onlyb)2, 3 and 4c)1 and 2d)1, 2, 3 and 4Correct answer is option 'D'. Can you explain this answer?

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Consider the following:

1. Liquidity Adjustment Facility

2. Open market operations

3. Market Stabilisation Scheme

4. Marginal Standing Facility

Which of the above is/are components of Monetary Policy?

a)
1 only
b)
2, 3 and 4
c)
1 and 2
d)
1, 2, 3 and 4

Correct answer is option 'D'. Can you explain this answer?

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Daily Current Affairs MCQ - March 6, 2022

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Consider the following:1. Liquidity Adjustment Facility2. Open market ...

Various Instruments of Monetary Policy

Liquidity Adjustment Facility (LAF):
- The LAF consists of overnight as well as term repo auctions.
- The aim of term repo is to help develop the interbank term money market, which in turn can set market based benchmarks for pricing of loans and deposits, and hence improve transmission of monetary policy.
- The RBI also conducts variable interest rate reverse repo auctions, as necessitated under the market conditions.
- Repo Rate:
  - The interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
- Reverse Repo Rate:
  - The interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF.
Marginal Standing Facility (MSF):
- A facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest.
- This provides a safety valve against unanticipated liquidity shocks to the banking system.
Open Market Operations (OMOs):
- These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.
Market Stabilisation Scheme (MSS):
- This instrument for monetary management was introduced in 2004.
- Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills.
- The cash so mobilised is held in a separate government account with the RBI.
Hence, option D is correct.

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Consider the following:1. Liquidity Adjustment Facility2. Open market operations3. Market Stabilisation Scheme4. Marginal Standing FacilityWhich of the above is/are components of Monetary Policy?a)1 onlyb)2, 3 and 4c)1 and 2d)1, 2, 3 and 4Correct answer is option 'D'. Can you explain this answer?

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Consider the following:1. Liquidity Adjustment Facility2. Open market operations3. Market Stabilisation Scheme4. Marginal Standing FacilityWhich of the above is/are components of Monetary Policy?a)1 onlyb)2, 3 and 4c)1 and 2d)1, 2, 3 and 4Correct answer is option 'D'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following:1. Liquidity Adjustment Facility2. Open market operations3. Market Stabilisation Scheme4. Marginal Standing FacilityWhich of the above is/are components of Monetary Policy?a)1 onlyb)2, 3 and 4c)1 and 2d)1, 2, 3 and 4Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following:1. Liquidity Adjustment Facility2. Open market operations3. Market Stabilisation Scheme4. Marginal Standing FacilityWhich of the above is/are components of Monetary Policy?a)1 onlyb)2, 3 and 4c)1 and 2d)1, 2, 3 and 4Correct answer is option 'D'. Can you explain this answer?.

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