Selling bonds by the RBI to private individuals and institutions reduces the money supply because it withdraws cash from circulation, reducing bank reserves and their ability to create new loans. This leads to a decrease in the overall money supply in the economy.

On the other hand other option leads to money supply as:-

Buying of a bond by RBI from private individuals and institutions = When the RBI buys bonds from private individuals and institutions, it increases the money supply by injecting cash into the economy. This cash enters the banking system, boosting available funds for lending and spending, which expands the overall money supply.

Decrease in bank rates =A decrease in bank rates increases the money supply by making borrowing less expensive. Lower interest rates encourage people and businesses to borrow more, leading to increased spending and investment, which puts more money into circulation.

Reduction in cash reserve ratio = A reduction in the Cash Reserve Ratio (CRR) leads to an increase in the money supply because it means that banks are required to hold a smaller portion of their deposits as reserves. With lower reserve requirements, banks have more funds available to lend to borrowers. This increased lending results in more money being created through the banking system, effectively expanding the money supply.