Q. Variable reserve rates and Open Market Operations are instruments of which of the following policies?
Answer: Monetary Policy
Notes: • Variable reserve rates and Open Market Operations are instruments of Monetary Policy.
• Open Market Operations is when the RBI involves itself directly and buys or sells short-term securities in the open market. This is a direct and effective way to increase or decrease the supply of money in the market. It also has a direct effect on the ongoing rate of interest in the market.
• Variable Reserve Requirement
• There are two components to this instrument of monetary policy, namely – The Cash Reserve Ratio (CLR) and the Statutory Liquidity Ratio (SLR).