Which of the following is NOT a monetary policy instrument of RBI?

The correct answer is Government Spending. Key Points

• Government spending is not a monetary policy instrument of RBI.
• It is a fiscal policy instrument used by the government to influence the economy.
• The bank rate is the rate at which RBI lends money to commercial banks.
• It is a monetary policy instrument used to regulate credit growth and inflation.
• Open market operations refer to the buying and selling of government securities by RBI in the open market.
• It is a monetary policy instrument used to inject or withdraw liquidity from the market.
• The Cash Reserve Ratio (CRR) is the percentage of deposits that banks are required to keep with RBI.
• It is a monetary policy instrument used to regulate the money supply in the economy.
• RBI uses a combination of monetary policy instruments to achieve its objectives of maintaining price stability, promoting economic growth, and ensuring financial stability.

Additional Information

• Government spending is a tool used by the government to influence the economy.
  • It refers to the amount of money spent by the government on goods and services, such as infrastructure development, social welfare programs, defense, etc.
• The bank rate is an important tool used by RBI to regulate credit growth and inflation.
  • A higher bank rate makes borrowing expensive, which reduces credit growth and inflation, while a lower bank rate stimulates borrowing and economic growth.
• Open market operations are used by RBI to inject or withdraw liquidity from the market.
  • When RBI buys government securities, it injects liquidity into the market, while selling government securities withdraws liquidity from the market.
• The Cash Reserve Ratio (CRR) is used by RBI to regulate the money supply in the economy.
  • A higher CRR reduces the amount of money that banks can lend, which reduces credit growth and inflation, while a lower CRR stimulates credit growth and economic activity.