Which one of the following activities of the Reserve Bank of India is considered to be part of 'sterilization'?

A)
Conducting 'Open Market Operations'
B)
Oversight of settlement and payment systems
C)
Debt and cash management for the Central and State Governments
D)
Regulating the functions of Non-banking Financial Institutions

Correct Answer :   Conducting 'Open Market Operations'

Note : * Sterilisation refers to the process by which the RBI takes away money from the banking system to neutralise the fresh money that enters the system. Classical sterilisation involves central banks conducting buy and sell operations in open markets. Hence, option a is the correct answer.

* For sterilisation, the RBI usually adopts the Market Stabilisation Scheme (MSS).


* Market Stabilisation Scheme (MSS) : Surplus liquidity arising from large capital inflows is absorbed through the sale of short-dated government securities and treasury bills..

Year : 2023
Category : General Studies