Match each Central Bank monetary policy instrument in Column A with its correct operational mechanism in Column B.
- Bank Rate PolicyThe official minimum rate at which the monetary authority rediscounts first-class commercial bills.
- Cash Reserve Ratio (CRR)The statutory minimum percentage of total customer deposits commercial banks must keep with the central bank.
- Moral SuasionInformal persuasion, directives, and requests issued to financial institutions without legal sanctions.
- Open Market Operations (OMO)The buying and selling of treasury bills and government securities to adjust bank reserves and money supply.
Answer
Bank Rate Policy matches the official minimum rediscount rate for commercial bills; Cash Reserve Ratio matches the statutory percentage of deposits kept with the central bank; Moral Suasion matches informal non-statutory persuasion and guidance; Open Market Operations match the buying and selling of government securities.
Each instrument correctly corresponds to its primary function: Bank Rate Policy sets the rediscount rate for commercial bills, Cash Reserve Ratio dictates the required cash percentage held at the central bank, Moral Suasion acts through informal guidance, and Open Market Operations alter liquidity via buying/selling treasury securities.
Step-by-Step Solution
Key Concept
Central Bank Monetary Policy Instruments and Operational Mechanisms