V Monetary policy is that instrument which is used to control

the volume of money and credit in the economy. In other

words, it is the policy of the government executed by the
medium of the central bank to control the availability, cost
and use of money and credit with the help of monetary
measures in order to achieve predetermined economic
objectives.

V According to Harry G. Johnson, monetary policy is a

Dzpolicy employing the central bankǯs control of the supply
of money as an instrument for achieving the objective of
general economic policydz.

V Thus monetary policy is meant to regulate the supply of

money and credit.
The main objectives of monetary policy are:
V Price stability
V Exchange stability
V Fuller employment
V Maximum feasible output
V Greater equality in the distribution of income and
wealth
V Healthy balance of payments
V High rate of economic growth
V r



 : tends to curb
inflation by contracting the money supply.

V ˜




 : tends to encourage
growth by expanding the money supply especially in
the phase of recession.
V There are two types of instruments of monetary policy in India:

Instruments of Monetary Policy

 

 





  

¦ank Rate Credit Rationing
Open Market operations Margin requirements
Cash reserve ratio (CRR) Regulation of Consumer credit
Statutory liquidity ratio(SLR) Direct Action
Repo Rate(Repurchase Price) Discriminationary Interest Rate
Reverse Repo Rate Moral Suasion
as on November, 2010-
V ¦ank Rate : 6 %
V CRR : 6%
V SLR : 25%
V Repo rate : 6.25%
V Reverse repo rate: 5.25%