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BANKING AND MONETARY POLICY — Economics STD 12 Commerce — Question

Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsBANKING AND MONETARY POLICY2 Marks
Question
What is Sterilization Policy?
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Answer

Sterilization Policy:
  • Generally, when there is excessive inflow of foreign exchange in India, the economic balance of the country is disrupted.
  • To make such situation in control $RBI$ buys sells its government securities equal to the amount of inflow of foreign exchange.
  • Thus, it sterilizes its balance sheet.
  • So that there is monetary balance.
  • This policy of $RBI$ is known as Sterilization policy.

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