Identify which of the following is not qualitative instrument of monetary policy of RBI: *
1 point
a) Open market operation
b) Margin requirements
c) Rationing of credit
d) Moral suasion
Answers
Answer:
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Open Market Operations is not a qualitative instrument of Monetary policy of Reserve bank of India.
Reserve Bank of India is the central authority to control the money supply and inflation level in the country. It uses Monetary Policy as a tool to implement the objectives.
Monetary policy include both Qualitative and Quantitative measures to curb the inflation level in the economy.
Qualitative Measures are:
Margin Requirements - It is referred as the policy of the bank to its customers to maintain the minimum amount of balance in their account every time. If the RBI want to increase the money supply, then the rates are minimal and vice versa.
Rationing of Credit- Under this, the RBI allocates the money supply in the economy through the medium of setting the loan rates and interest on it.
Moral Suasion- Under this, RBI pressurizes the banks to not provide credits at low interest rate. This can be considered as the last remedy to RBI to control the inflation in the economy.
Quantitative Measures-
Open Market Operations (OMOs)- Under OMOs, the RBI issue the Treasury Bills( T- Bills) in the economy. This is issued by them on behalf of the central Government and also known as Gilt edged Security or Dated Security.
If RBI wants to increase the money supply, they will buy back these T-Bills and vice versa.
To know more about Monetary Policy, Follow:
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