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Under a reverse repurchase agreement, the RBI is effectively
Awithdrawing money from the system
Binjecting money permanently
Cfixing the exchange rate
Draising the reserve ratio
Answer & Solution
Correct answer: A. withdrawing money from the system
1. In a reverse repo the RBI sells a security with an agreed repurchase date and price.
2. Banks part with funds to buy it.
3. So the operation **withdraws money** from the system.
4. A permanent injection would be an outright purchase, not a reverse repo, which makes that option the trap.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.4 POLICY TOOLS TO CONTROL MONEY SUPPLY_
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