Question

If the Reserve Bank of India wants to contract credit in the economy, it would most likely:

Q: Answer-If the Reserve Bank of India wants to contract credit in the economy, it would most likely:

To contract credit reduce money supply, the RBI uses contractionary monetary policy. Increasing the Cash Reserve Ratio CRR and Statutory Liquidity Ratio SLR reduces the funds banks have available to lend, thereby contracting credit. e is an expansionary open market operation.