BANKING AFFAIRS

Detailed explanation-1: -The RBI implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, moral persuasion and through many other instruments. Using any of these instruments will lead to changes in the interest rate, or the money supply in the economy.

Detailed explanation-2: -In the event of a fund deficiency, a bank can borrow money from the central bank of a country. In India’s case that would be the Reserve Bank of India. The borrowing is done as per the basis of the monetary policy of that country. Bank Rate is a featured concept in the economy segment of the IAS exam.

Detailed explanation-3: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations. In 2008, the Fed added paying interest on reserve balances held at Reserve Banks to its monetary policy toolkit.