Which of the following is NOT a tool of monetary policy used by RBI to control interest rates in the economy?

Question

Question

This question was previously asked in

DSSSB Junior Secretariat Assistant Official paper (Held on: 7 April 2022 Shift 1 )

Answer 1

The correct answer is Direct Tax rate cut.

Key Points

Monetary policy refers to the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the Act.
The primary objective of the RBI’s monetary policy is to maintain price stability while keeping in mind the objective of growth.
Price stability is a necessary precondition to sustainable growth.

Additional Information

Repo Rate :

The interest rate at which the Reserve Bank provides liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
It is a monetary policy used by RBI to control interest rates in the economy.

CRR :

The cash reserve ratio (CRR) is the percentage of a bank's total deposits that it needs to maintain as liquid cash.
This is an RBI requirement, and the cash reserve is kept with the RBI.
A bank does not earn interest on this liquid cash maintained with the RBI and neither can it use this for investing and lending purposes.

OMO :

Open market operations (OMO) refers to a central bank buying or selling short-term Treasuries and other securities in the open market in order to influence the money supply.
The objective of OMO is to regulate the money supply in the economy.
RBI carries out the OMO through commercial banks and does not directly deal with the public.