Many a times we read in the newspapers that RBI takes certain steps to curb the menace of Inflation. In this context, which among the following will not help RBI in controlling the inflation in the country?

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	An increase in the Bank Rate
B	An increase in the Reserve Ratio Requirements
C	A purchase of securities in the open market
D	Rationing of the credit

Explanation:

Detailed explanation-1: -The RBI controls Inflation and Deflation by employing a variety of monetary policy tools such as Repo Rate, Reverse Repo Rate, Bank Rate, Open Market Operations, Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), Liquidity Adjustment Facility (LAF), Market Stabilisation Scheme.

Detailed explanation-2: -The Reserve Bank of India is the authority to control inflation under RBI Act 1934. Inflation targeting by RBI: The RBI is by law responsible for maintaining price stability. Thus, for any given month, RBI’s comfort zone for inflation lies between 2 per cent and 6 per cent.

Detailed explanation-3: -The most important and commonly used method to control inflation is monetary policy of the Central Bank. Most central banks use high interest rates as the traditional way to fight or prevent inflation.

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