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Ratios and OMO

When RBI want...

Question

When RBI wants to reduce liquidity in the banking system,

A

it increases the CRR

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B

It increases the repo rate

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C

It increases the SLR

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D

It increases the reverse repo rate

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Solution

The correct option is A
it increases the CRR

When RBI wants to reduce liquidity in the banking system, it increases the CRR as it reduces the money supply in the economy.

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