Official Answer Key & Detailed Solution
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Correct Answer: Option (A) — Conducting ‘Open Market Operations’
Concept & Option Breakdown
Standard Reference VerifiedSterilization refers to monetary actions taken by a central bank to neutralize the domestic money supply impact of foreign exchange interventions. When RBI buys foreign currency, it injects rupees; to sterilize this liquidity injection and prevent inflation, it conducts Open Market Operations (OMOs) by selling government securities in the market.
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