Question

Which of the following is a measure taken by RBI to control inflation in our country?

• A. Increase in CRR
• B. Increase in SLR
• C. Both A and B
• D. Neither A nor B

Answer 1

The correct option is C

Both A and B

In the situation of inflation, the RBI aims to reduce the money supply. So, the RBI can increase CRR and/or SLR. This way, banks will have a lesser lending capacity as they have to use more the deposits as reserves. Thus the money supply will fall.