Which one of the following activities of the Reserve Bank of India is considered to be part of “sterilization”

Conducting open Market
Oversight of settlement and payment systems
Debt and cash management for the Central and State Governments
Regulating the functions of Non-banking Financial Institutions

The correct answer is (a), Conducting open Market.

Open market operations are the buying and selling of government securities by a central bank in order to influence the money supply. When the central bank buys government securities, it injects money into the economy. When the central bank sells government securities, it withdraws money from the economy.

Sterilization is a monetary policy tool used by central banks to offset the impact of open market operations on the money supply. When the central bank buys government securities, it injects money into the economy. This can lead to inflation, as there is now more money chasing the same amount of goods and services. To offset this, the central bank can sell government securities, which withdraws money from the economy. This helps to keep inflation in check.

The other options are not considered to be part of sterilization.

(b) Oversight of settlement and payment systems is the responsibility of the Reserve Bank of India to ensure the smooth functioning of the financial system.

(c) Debt and cash management for the Central and State Governments is the responsibility of the Reserve Bank of India to ensure that the government has enough money to meet its obligations.

(d) Regulating the functions of Non-banking Financial Institutions is the responsibility of the Reserve Bank of India to ensure that these institutions are operating in a safe and sound manner.