RBI Monetary Policy: Financial stability Tools

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The Financial Markets Operations Department (FMOD) of RBI
operationalises the monetary policy, mainly through day-to-day liquidity
management operations. Following are few tools at the disposal of RBI:

1) Direct instruments:

Cash Reserve Ratio (CRR): The share of net demand and time
liabilities that banks most maintain as cash balance with the Reserve
Bank,

Statutory Liquidity Ratio (SLR): The share of net demand and time
liabilities that banks most maintain in safe and liquid assets, such as
government securities, cash and gold.

Refinance facilities: Sector-specific refinance facilities (e.g., against
lending to export sector) provided to banks.

2) Indirect Instruments:

• Liquidity Adjustment Facility (LAF)

• Repo/Reverse Repo Rate

• Open Market Operations (OMO)

• Marginal Standing Facility (MSF)

• Bank Rate • Market Stabilization Scheme
(MSS)

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