Question
Download Solution PDFWhich of the following monetary instruments of RBI is qualitative in nature?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Moral Suasion.Key Points
- Moral suasion is a qualitative monetary instrument used by the RBI to persuade banks to act in a certain way without actually mandating them to do so.
- It involves using informal communication and persuasion techniques to influence the behavior of banks and other financial institutions.
- This instrument is used to maintain financial stability, regulate credit flow, and ensure compliance with monetary policy objectives.
- Cash reserve ratio, bank rate, and open market operations are all quantitative monetary instruments that involve controlling the supply of money in the economy through direct interventions in the money market.
Additional Information
- Cash reserve ratio is the percentage of deposits that banks are required to keep with the RBI as a reserve.
- Bank rate is the interest rate at which the RBI lends to commercial banks.
- Open market operations involve buying and selling government securities to control the money supply.
- Hence, the correct answer is option 1 - Moral suasion.
Last updated on Jun 26, 2025
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