A) borrowing by scheduled banks from the RBI
B) lending by commercial banks to industry and trade
C) purchase and sale of government securities by the RBI
D) None of the above
Correct Answer: C
Solution :
Exp. [c] The Open Market Operations of RBI refer to the sale and purchase of government securities by the RBI in the open market. Most central banks use this as their primary tool of monetary policy. Sale of government securities by the RBI leads to an increase in interest rates and contraction in liquidity, while the purchase of government securities by the RBI leads to a fall in interest rates and an expansion of liquidity.
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