Explanations –

• Open Market Operations (OMO): The RBI injects liquidity by purchasing government securities in the open market, providing cash to banks in exchange for these securities. This is a common tool used by the RBI to manage liquidity deficits.
• Repo Transactions: Under the Liquidity Adjustment Facility (LAF), the RBI provides short-term funds to banks through repo transactions, where banks borrow money by pledging government securities as collateral.
• Reduction in the Cash Reserve Ratio (CRR): When the RBI reduces the CRR, banks are required to keep a smaller portion of their deposits with the RBI, freeing up funds for lending and injecting liquidity into the system.
• Increase in the Statutory Liquidity Ratio (SLR): Increasing the SLR requires banks to hold a higher proportion of their net demand and time liabilities (NDTL) in government-approved securities, which reduces liquidity in the system rather than injecting it.
• Reverse Repo Transactions: Reverse repo transactions are used by the RBI to absorb excess liquidity from the banking system, as banks park their surplus funds with the RBI in exchange for interest.

Source: AIR