Which of the following does not come under the quantitative methods of monetary policy?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Moral Suasion
Quantitative tools change the amount of money supply: CRR, bank rate and open market operations (repo is one type of open market operation). Moral suasion only persuades banks, so it is a qualitative tool.
Option (1) Cash Reserve Ratio — True. It changes how much banks can lend.
Option (2) Bank Rate — True. It changes the cost of RBI loans to banks.
Option (3) Repo Rate — True. Repo is a kind of open market operation.
Option (4) Moral Suasion — False. It works by persuasion, not by changing amounts.
NCERT (2026-27): “3.4 Policy Tools to Control Money Supply … The RBI controls the money supply in the economy in various ways. The tools used by the Central bank to control money supply can be quantitative or qualitative. Quantitative tools, control the extent of money supply by changing the CRR, or bank rate or open market operations. Qualitative tools include persuasion by the Central bank in order to make commercial banks discourage or encourage lending which is done through moral suasion, margin requirement, etc. … There are two types of open market operations: outright and repo. …” |