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Q30 (CDS-II/2017) Economy › Money, Banking & Inflation › Monetary policy tools Answer Verified

The monetary policy in India uses which of the following tools? 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Select the correct answer using the code given below.

Result
Your answer: —  Â·  Correct: A

Explanation

Monetary policy in India is formulated and executed by the Reserve Bank of India (RBI) to regulate money supply and credit [1]. The primary tools used for this purpose include the Bank Rate and Open Market Operations (OMO). The Bank Rate is a quantitative tool used to influence interest rates and credit expansion. Open Market Operations involve the buying and selling of government securities by the RBI to manage liquidity and the monetary base. In contrast, Public Debt and Public Revenue are instruments of Fiscal Policy, which is managed by the Government of India rather than the monetary authority. While the RBI acts as a debt manager for the government, debt management is distinct from the core objectives of monetary policy, which focus on price stability and inflation targeting [3]. Therefore, only Bank Rate and Open Market Operations are monetary policy tools.

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > MONETARY POLICY IN INDIA > p. 165
  2. [3] https://www.sciencedirect.com/science/article/pii/S0970389615000087
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SIMILAR QUESTIONS

IAS · 2015 · Q86 Relevance score: 4.41

With reference to Indian economy, consider the following : 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are component/components of Monetary Policy?

IAS · 2012 · Q60 Relevance score: -2.05

Which of the following are the methods of Parliamentary control over public finance in India?

  1. Placing Annual Financial Statement before the Parliament
  2. Withdrawal of moneys from Consolidated Fund of India
  3. Provisions of supplementary grants and vote-on-account
  4. A periodic or at least a mid-year review of programme of the Government against macroeconomic forecasts and expenditure by a Parliamentary Budget Office
  5. Introduction of Finance Bill in the Parliament

Select the correct answer using the codes given below:

CDS-II · 2015 · Q92 Relevance score: -2.26

Which of the following factors led to a decline in inflation rate in India during 2014-2015? 1. Persistent decline in crude oil prices 2. Softness in global prices of tradables such as edible oils and coal 3. Tight monetary policy pursued by the Reserve Bank of India Select the correct answer using the code given below.

IAS · 2020 · Q47 Relevance score: -3.06

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do ? 1. Cut and optimize the Statutory Liquidity Ratio 2. Increase the Marginal Standing Facility Rate 3. Cut the Bank Rate and Repo Rate Select the correct answer using the code given below :

IAS · 2012 · Q100 Relevance score: -3.32

The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following? 1. Other banks retain their deposits with the RB I. 2. The RBI lends funds to the commercial banks in times of need. 3. The RBI advises the commercial banks on monetary matters. Select the correct answer using the codes given below: