{"id":92061,"date":"2025-06-01T11:13:05","date_gmt":"2025-06-01T11:13:05","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=92061"},"modified":"2025-06-01T11:13:05","modified_gmt":"2025-06-01T11:13:05","slug":"which-one-of-the-following-activities-of-the-reserve-bank-of-india-is","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-activities-of-the-reserve-bank-of-india-is\/","title":{"rendered":"Which one of the following activities of the Reserve Bank of India is"},"content":{"rendered":"

Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilization’?<\/p>\n

[amp_mcq option1=”Conducting ‘Open Market Operations'” option2=”Oversight of settlement and payment systems” option3=”Debt and cash management for the Central and State Governments” option4=”Regulating the functions of Non-banking Financial Institutions” correct=”option1″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC IAS – 2023<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nSterilization, in the context of central banking, refers to actions taken by the central bank to offset the impact of its interventions in the foreign exchange market on the domestic money supply. When a central bank buys foreign currency to prevent its appreciation (or sells to prevent depreciation), it either injects domestic currency (when buying foreign currency) or withdraws it (when selling foreign currency) from the banking system, thereby affecting the domestic money supply. To sterilize this effect, the central bank conducts offsetting operations in the domestic money market. The most common tool used for sterilization is Open Market Operations (OMO). For example, if the RBI buys dollars, it pays rupees, increasing liquidity. To sterilize this, RBI sells government securities in the open market, absorbing rupees and withdrawing the excess liquidity.
\n<\/section>\n
\n– Sterilization is a monetary policy tool used by central banks.
\n– Its purpose is to neutralize the impact of foreign exchange interventions on domestic money supply.
\n– The primary tool used for sterilization is Open Market Operations (buying or selling government securities).
\n<\/section>\n
\nOther options are not related to sterilization: Oversight of settlement and payment systems is a regulatory function. Debt and cash management for the government is agency work performed by the RBI, not monetary policy per se. Regulating NBFCs is part of the RBI’s supervisory role.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilization’? [amp_mcq option1=”Conducting ‘Open Market Operations’” option2=”Oversight of settlement and payment systems” option3=”Debt and cash management for the Central and State Governments” option4=”Regulating the functions of Non-banking Financial Institutions” correct=”option1″] This question was previously asked in UPSC … <\/p>\n

Detailed SolutionWhich one of the following activities of the Reserve Bank of India is<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1105,1120,1190],"class_list":["post-92061","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1105","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"\nWhich one of the following activities of the Reserve Bank of India is<\/title>\n<meta name=\"description\" content=\"Sterilization, in the context of central banking, refers to actions taken by the central bank to offset the impact of its interventions in the foreign exchange market on the domestic money supply. When a central bank buys foreign currency to prevent its appreciation (or sells to prevent depreciation), it either injects domestic currency (when buying foreign currency) or withdraws it (when selling foreign currency) from the banking system, thereby affecting the domestic money supply. To sterilize this effect, the central bank conducts offsetting operations in the domestic money market. The most common tool used for sterilization is Open Market Operations (OMO). For example, if the RBI buys dollars, it pays rupees, increasing liquidity. To sterilize this, RBI sells government securities in the open market, absorbing rupees and withdrawing the excess liquidity. - Sterilization is a monetary policy tool used by central banks. - Its purpose is to neutralize the impact of foreign exchange interventions on domestic money supply. - The primary tool used for sterilization is Open Market Operations (buying or selling government securities).\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-activities-of-the-reserve-bank-of-india-is\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which one of the following activities of the Reserve Bank of India is\" \/>\n<meta property=\"og:description\" content=\"Sterilization, in the context of central banking, refers to actions taken by the central bank to offset the impact of its interventions in the foreign exchange market on the domestic money supply. 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To sterilize this, RBI sells government securities in the open market, absorbing rupees and withdrawing the excess liquidity. - Sterilization is a monetary policy tool used by central banks. - Its purpose is to neutralize the impact of foreign exchange interventions on domestic money supply. - The primary tool used for sterilization is Open Market Operations (buying or selling government securities).\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-activities-of-the-reserve-bank-of-india-is\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T11:13:05+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Which one of the following activities of the Reserve Bank of India is","description":"Sterilization, in the context of central banking, refers to actions taken by the central bank to offset the impact of its interventions in the foreign exchange market on the domestic money supply. 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