Banking Awareness - Basics Of Banking & Banking Terminology
Which of the following tools is directly used by RBI to absorb excess liquidity from banks?
Which of the following tools is directly used by RBI to absorb excess liquidity from banks?
medium Q5 of 15
Step-by-Step Solution
Step 1: Identify liquidity absorption
Absorbing liquidity means RBI borrows from banks.Step 2: Match with correct tool
Reverse Repo allows banks to lend funds to RBI.Final Answer:
Reverse Repo Rate → Option AQuick Check:
Reverse Repo pulls money out of banks ✅
Quick Trick: Liquidity absorption = Reverse Repo.
Common Mistakes:
- Thinking CRR alone absorbs short-term liquidity.
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