Monetary Policy

[abhinav619]

In the last few months the forex reserves in India have been increasing. Which of the
following sterilization policies would the RBI should adopt?
 a) Increase CRR
 b) Decrease CRR
 c) Decrease discount rate
 d) Buy government securities

[Akshay Jain]

Its d option

[Homer Simpson]

@Akshay: could u explain the idea?

[Saurabh815]

Ans is a.
In last few months RBI is providing foreign investors rupees in exchange for dollars at nearly constant exchange rate. It is resulting in building up of forex reserves and increasing the Rs money supply.
hence to sterilize the RBI should increase the CRR as this will decrease the money supply to the normal.
(I hope you know CRR)

[Anjali]

It's definitely A !

[Akshay Jain]

Sry for dat ans....its a...

[Homer Simpson]

Ok i got it now, thanks!