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Which other monetary policy instrument the RBI cannot use?
Open Market Operations
Cash Reserve Ratio
Margin Requirement
Deficit Financing
- Open Market Operations (OMO):
- The RBI buys or sells government securities in the open market to control the money supply. It can utilize this instrument.
- Cash Reserve Ratio (CRR):
- This is the percentage of a bank’s total deposits that must be kept in reserve. RBI uses this to regulate liquidity in the economy.
- Margin Requirement:
- This refers to the proportion of the loan value that borrowers must finance themselves. It controls the credit flow and is an available option for RBI.
- Deficit Financing:
- This involves funding government spending by borrowing, rather than using the central bank’s monetary tools.
- RBI cannot directly employ this as a monetary policy instrument.
Answer: Your Answer is Option 4 - Deficit Financing
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By: Milap Bansal ProfileResourcesReport error
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