Content

01 02

Introduction

Objectives Instruments

03

SUBMITTED BY D.SAIMALA R.NO: 12251034.

OBJECTIVES/AIMS OF THE POLICY:

Stability in price. Full employment. Economic growth. Equal distribution of income and wealth. Stable exchange rate.

MONETORY POLICY

Regulation of supply of Money and Cost and Availability of Credit in the economy

Maintain price stability, ensure adequate flow of credit to the productive sectors of the economy and overall economic growth

CRR

Quantitative

Bank Rates

OMOs Instruments of MP

Credit Ceiling

Change in Margin Lending Qualitative

Directed Credit Control

Moral Suasion

Cash Reserve Ratio(CRR):

CRR
Banks in India are required to hold a certain proportion of their deposits in the form of cash which is known as CRR.

current CRR
6%

How it controls money supply in economy

CRR-- money with bank leads to low supply. CRR-- money with bank leads to high supply.

Bank Rates
bank rate
The rate at which central bank (RBI) lends money to other banks or financial institutions.

present bank rate

6%

How it controls the money supply

bank rates interest rates in commercial banks leads to low barrowings. bank rates interest rates in commercial banks leads to high barrowings.

OMOs
Expand:
Open Market Operations.
Broad sense: purchase and sale of variety of assets by central banks. Indian sense: purchase and sale of government securities.

How it controls money supply

To increase MS RBI buys securities. To reduce MS RBI sells securities.

Other instruments:
SLR:
the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. present SLR 24% . RBI empower to increase up to 40%.

REPO:
the rate at which the RBI lends shot-term money to the banks against securities. (8.5%)

Reverse REPO:
the rate at which banks park their short-term excess liquidity with the RBI. (7.5%)

 Credit ceiling:

Ceiling on the highest amount and time of credit for certain purpose.

Margin lending:

maximum margin for lending against specific securities.

Discriminatory rates:

Different rate of interest charged on certain type of advances.

Moral suasion:
An application of pressure, but not force, by an authority (such

as the Federal Reserve Board) to get members to adhere to a policy. Non-official' tool of monetary policy which governments employ.

THANK YOU