New IFSCA Grade A 2024: Decoding Phase 2 Paper 2 Syllabus!
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Question

Read the following passage and answer the next 3 questions (Q18-Q20) Monetary policy is the process of drafting, announcing, and implementing the plan of actions taken by the central bank, currency board, or other competent monetary authority of a country that controls the quantity of money in an economy and the channels by which new money is supplied.  Monetary policy consists of the management of money supply and interest rates, aimed at meeting macroeconomic objectives such as controlling inflation, consumption, maintaining growth and liquidity. This is achieved by actions such as modifying the interest rate, buying or selling government bonds, regulating foreign exchange (forex) rates, and changing the amount of money banks are required to maintain as reserves.

Which of the following is an unconventional monetary policy tool used by the Reserve Bank of India?

A Open market operations Correct Answer Incorrect Answer
B Bank rate Correct Answer Incorrect Answer
C Long-term repo operations Correct Answer Incorrect Answer
D Liquidity adjustment facility Correct Answer Incorrect Answer
E Quantitative Easing Correct Answer Incorrect Answer

Solution

The central bank introduced Long Term Repo Operations (LTROs) in February 2020 under its revised liquidity framework to kick start the cycle of lowering down borrowing cost by way of providing a durable liquidity to the banking system. The lower cost supports credit off take, boosts the investment and improves the aggregate demand in the economy.

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