Which one of the following is emerged as a major instrument of Monetary Policy in the Indian economy?

Liquidity Adjustment Facility

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Commercial Papers

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Treasury Bills

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None of the above

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Solution

The correct option is A Liquidity Adjustment Facility
Liquidity Adjustment Facility (LAF) is a tool used by the RBI to manage short term liquidity or money supply in the market. LAF helps banks to quickly borrow money in case of emergency or for adjusting in their SLR/CRR requirements.

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