Consider the following statements regarding the monetary tools used by the Reserve Bank of India: 1. The Repo Rate is the exact rate at which the RBI borrows money from commercial banks. 2. Open Market Operations (OMO) directly involve the buying and selling of government securities by the RBI. 3. An increase in the Statutory Liquidity Ratio (SLR) logically reduces the lending capacity of commercial banks. Which of the statements given above is/are correct?

Correct answer: 2 and 3 only

Explanation: ✅ Correct Answer: B) 2 and 3 only 📚 Explanation: The first statement is inherently incorrect because the Repo Rate is the rate at which the RBI lends short-term funds to commercial banks, whereas the Reverse Repo Rate is specifically for borrowing. Open Market Operations (OMO) correctly refer to the RBI's daily mechanism of trading government securities in the open market to carefully manage system liquidity. Additionally, logically raising the SLR forces banks to hold more liquid assets in reserve, which directly and mathematically restricts their total capacity to issue loans.