The Reserve Bank sells foreign exchange when there is a deficit. This move of RBI is known by which of the following?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Official reserve sale.
When there is a deficit in the Balance of Payments (BOP), the Reserve Bank of India (RBI) intervenes by selling foreign exchange from its reserves to finance the deficit. This act is called an "official reserve sale."