RBI Monetary Policy: Financial stability Tools
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)