Q. If the Reserve Bank of India wants to increase the Cash Reserves commercial Banks, which among the following would be the most probable step taken by it ?
Answer: Buy bonds in the open market
Notes: The correct answer is "Buy bonds in the open market." When the Reserve Bank of India (RBI) buys bonds, it injects liquidity into the banking system, increasing the cash reserves of commercial banks. This is part of an open market operation, a common monetary policy tool used by central banks worldwide to regulate money supply and influence interest rates. By increasing cash reserves, banks have more funds available for lending, which can stimulate economic activity.