This presentation gives you and basic idea about the monetary policies in India that are undertaken by the RBI and its impact .

1. MONETRY POLICY OF
INDIA

2. CONTENT

3. MONETRY POLICY
• Monetary policy is the process by which
monetary authority of a country, generally a
central bank controls the supply of money in
the economy by exercising its control over
interest rates in order to maintain price
stability and achieve high economic growth. in
India, the central monetary authority is the
RBI.

4. GOALs OF MONETARY POLICY
To maintain relatively stable prices and low
unemployment.

5. Objectives Of MOnetary
pOlicy
1.Financial stability

6. 2. Controls Inflation
3.Price Stability

7. MeasUre Of MOney stOcK
• The RBI employs four measures of money stock,
namely M1, M2, M3 and M4.
• M1 : This is the money supply i.e. the currency with
the public and demand deposits with the bank and
other deposits with RBI. In developed countries
demand deposits form a major part of the money
supply. Demand deposits are primarily savings and
current account deposits where your are able to
"demand" your money at any time, unlike a term
deposit, which cannot be accessed for a
predetermined period.

8. M2: M1+Post Office Savings
M3 or aggregate money supply : M2
Time Deposits with the banks.
M4: M3+total Post office deposits

9. MONETARY OPERATIONS
• Statutory Liquidity Ratio (SLR)
• Cash Reserve Ratio (CRR)
• Repo Rate & Reversed Repo Rates (RR & RRR)

10. STATuTORY LIquIdITY RATIO
• Every financial institute have to maintain a
certain amount of liquid assets from their time
and demand liabilities with the RBI. These liquid
assets can be cash, precious metals, approved
securities like bonds etc.
• The ratio of the liquid assets to time and demand
liabilities is termed as Statutory Liquidity Ratio
There was a reduction from 38.5% to 25%.The
current SLR is 23%.

11. CASh RESERvE RATIO
• Cash Reserve Ratio is a certain percentage
of bank deposits which banks are required to
keep with RBI in the form of reserves or
balances .
• Higher the CRR with the RBI lower will be
the liquidity in the system and vice-versa.RBI
is empowered to vary CRR between 15
percent and 3 percent.
• As of October 2013, the CRR is 4.00 percent

12. REPO RATE
• Repo rate is the rate at which RBI lends to
commercial banks generally against
government securities. Reduction in Repo rate
helps the commercial banks to get money at a
cheaper rate and increase in Repo rate
discourages the commercial banks to get
money as the rate increases and becomes
expensive

13. ReveRse Repo Rate
• Reverse Repo rate is the rate at which RBI
borrows money from the commercial banks.
The increase in the Repo rate will increase the
cost of borrowing and lending of the banks
which will discourage the public to borrow
money and will encourage them to deposit.
• As the rates are high the availability of credit
and demand decreases resulting to decrease
in inflation. This increase in Repo Rate and
Reverse Repo Rate is a symbol of tightening of
the policy. As of October 2011, the repo rate
is 7.75 and reverse repo rate is 6.75