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    Question

    In the context of economy, sterilization by RBI refers

    to:
    A operations by RBI to neutralize effects of excess inflow of foreign investments in the economy. Correct Answer Incorrect Answer
    B operations by RBI to neutralize the effects of high non-performing assets on the economy. Correct Answer Incorrect Answer
    C operations by the RBI to neutralize the effects of high fiscal deficit on the economy. Correct Answer Incorrect Answer
    D None of the above Correct Answer Incorrect Answer

    Solution

    Sterilization refers to the process by which the RBI takes away money from the banking system ton neutralise the fresh money that enters the system. By selling the government securities, RBI suck out the liquidity from the market and hence sterilizes the economy against adverse external shocks.

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