IAS Economy Practice Question . 10

Consider the following instruments of RBI’s monetary policy:
1. Reverse Repo Rate
2. Cash Reserve Ratio
3. Statutory Liquidity Ratio
An increase in which among these could raise the interest rates in markets?
[A]Only 1
[B]Only 1 & 2
[C]1, 2 & 3
[D]Only 2 &3


Answer: 1, 2 & 3
Monetary policy actions, therefore, are forward looking. The Reserve Bank uses various policy levers, such as repo rate, reverse repo rate, cash reserve ratio, statutory liquidity ratio and bank rate, to influence the amount of money in the market. An increase in any one of these could raise the interest rates.

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