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Which instrument of monetary policy is used by the RBI to control the availability of money in the economy?
  • a)
    Bank rate
  • b)
    Repo rate
  • c)
    Reverse repo rate
  • d)
    Cash Reserve Ratio (CRR)
Correct answer is option 'D'. Can you explain this answer?
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Which instrument of monetary policy is used by the RBI to control the ...
The Cash Reserve Ratio (CRR) is the instrument used by the RBI to control the availability of money in the economy. Commercial banks are required to maintain a certain proportion of their deposits in the form of cash with the RBI. By increasing or decreasing the CRR, the RBI can regulate the amount of money available for lending by commercial banks. When the CRR is increased, banks have to keep a higher proportion of their deposits with the RBI, reducing the amount of money available for lending. On the other hand, a decrease in the CRR increases the availability of money for lending.
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Which instrument of monetary policy is used by the RBI to control the availability of money in the economy?a)Bank rateb)Repo ratec)Reverse repo rated)Cash Reserve Ratio (CRR)Correct answer is option 'D'. Can you explain this answer?
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