BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Inflation only
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Liquidity in economy
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Borrowing powers of the banks
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Flow of foreign direct investments
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Detailed explanation-1: -Open market operation transactions are done by RBI to regulate both inflation and money supply.
Detailed explanation-2: -Open Market Operations is the simultaneous sale and purchase of government securities and treasury bills by RBI. The objective of OMO is to regulate the money supply in the economy. RBI carries out the OMO through commercial banks and does not directly deal with the public.
Detailed explanation-3: -In order to control money supply, the RBI buys and sells government securities in the open market. These operations conducted by the Central Bank in the open market are referred to as Open Market Operations.
Detailed explanation-4: -Open market operations refer to the selling and purchasing of the treasury bills and government securities by the central bank of any country in order to regulate money supply in the economy. It is one of the most important ways of monetary control that is exercised by the central banks.
Detailed explanation-5: -The RBI has the power to influence the supply of money by adjusting the deposits, reserves (SLR and CRR) it expects banks to maintain, and interest rates that it charges commercial banks that wish to borrow money. These rates and requirements are changed according to the requirements of the economy.