Which among the following is not a method adopted by the RBI to maintain liquidity in the economy?

Correct option is C

The correct answer is C
Explaination:
· Buying of shares (C) is generally not a method used by the Reserve Bank of India (RBI) to manage systemic liquidity in the economy.
· The RBI's primary tools for liquidity management fall under Monetary Policy, specifically Open Market Operations (OMO) and instruments like the Cash Reserve Ratio (CRR) and Repo Rate.
· OMO involves the buying and selling of government securities (bonds), not corporate shares.
Information Booster:
· Monetary Policy Tools are broadly categorized into Quantitative (like OMO, CRR, SLR, Repo Rate) and Qualitative (like moral suasion).
· When the RBI wants to inject (increase) liquidity, it:
· Buys Government Bonds (OMO).
· Decreases the Cash Reserve Ratio (CRR).
· Decreases the Repo Rate.
· When the RBI wants to absorb (decrease) liquidity, it:
· Sells Government Bonds (OMO).
· Increases the Cash Reserve Ratio (CRR).
· Increases the Repo Rate.
Additional Knowledge:
· Buying of government bonds (A): This is an Open Market Operation (OMO). The RBI buys bonds from commercial banks, injecting cash into the system and increasing liquidity.
· Maintaining cash reserve ratio (CRR) (B): CRR is the fraction of a bank's Net Demand and Time Liabilities (NDTL) that it must keep with the RBI. Decreasing it increases the lendable funds of banks, thus boosting liquidity.
· Decreasing repo rate (D): The Repo Rate is the rate at which banks borrow from the RBI. Decreasing it makes borrowing cheaper for banks, encouraging them to lend more, thereby increasing liquidity in the economy.