BANKING AFFAIRS

Detailed explanation-1: -The Reserve Bank of India (RBI) uses moral suasion as a qualitative instrument of monetary policy, unlike statutory liquidity ratio or cash reserve ratio. Moral suasion is a request by the RBI to the commercial banks to take specific measures as per the economy’s trends.

Detailed explanation-2: -The instruments of monetary policy include discount rate, reserve requirements, and open market operations.

Detailed explanation-3: -Moral suasion is the act of persuading a person or group to act in a certain way through rhetorical appeals, persuasion, or implicit and explicit threats-as opposed to the use of outright coercion or physical force. In economics, it is sometimes used in reference to central banks.

Detailed explanation-4: -Central banks have four main monetary policy tools: the reserve requirement, open market operations, the discount rate, and interest on reserves.1 Most central banks also have a lot more tools at their disposal.

Detailed explanation-5: -The main instruments of the monetary policy are Cash Reserve Ratio, Statutory Liquidity Ratio, Bank Rate, Repo Rate, Reverse Repo Rate, and Open Market Operations.