Which of the following operations RBI is/are likely to increase liquidity in the market?

  1. Quantitative easing.
  2. Decreasing the Reverse repo rate.
  3. Decreasing statutory liquidity Ratio.

Select the correct option from the codes given below:

Answer: [D] 1, 2 & 3

All of the above will increase the liquidity in the Market. Quantitative easing is used by central banks, to pump money directly into the market, by buying government bonds and securities. With RBI decreasing Reverse repo rate, commercial banks will find less interest in depositing money to RBI; hence banks will prefer to use money for public thus increasing liquidity in market. With RBI decreasing SLR, Commercial banks will have more money in hands to lend it to public; hence it will increase liquidity in market.

This question is a part of GKToday's Integrated IAS General Studies Module