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Ratios and OMO

What will be ...

Question

What will be the impact on the Cash Reserves of commercial banks if RBI conducts a sale of securities?

A

Increase or decrease

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B

Decrease

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C

Remain Constant

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D

Increase

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Solution

The correct option is B
Decrease

If RBI conducts a sale of securities, it absorbs liquidity in the economy thereby reducing Cash Reserves in commercial banks.

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Similar questions

Q. Which one among the following is the precious metal (Gold) or other approved securities that a commercial bank must maintain as reserves other than the cash with RBI?

Q. ___________ refers to that portion of total deposits of a commercial bank, which it has to keep with RBI in the form of cash reserves.

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Q. The Reserve Bank of India(RBI) acts as a banker's bank. This would imply which of the following?

1

. Other banks retain their deposits with the RBI

2

. RBI lends funds to the commercial banks in times of need

3

. RBI advises the commercial banks on monetary matters
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