Money Supply and Monetary Policy

Economic Affairs

Title

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Indian Economy - Understanding the basics of Indian economic system

Consider the following statements:

1. LTRO (Long-term Repo Operations) ensure that banks reduce their MCLR without reduction in policy rates.

2. Operation Twist involves sale and purchase of government securities to bring down short-term interest rates.

Which of the above statements is/are incorrect ?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

2 only.

LTRO (Long Term Repo Operations) will assist the Reserve Bank of India to guarantee that the banks and financial institutions lower their lending rates without diminishing the policy rates.
Operation Twist is a monetary policy tool central banks use to manipulate interest rates.
It involves buying and selling long-term and short-term government bonds simultaneously.
The aim is to lower long-term interest rates and stimulate borrowing and investment.