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CENTRAL BANKING

T.Y.B.COM

that is.MONETARY POLICY Monetary policy is a regulatory policy by which the central bank or monetary authority of a country controls the supply of money. the rate of interest. . availability of bank credit & cost of money.

OBJECTIVES OF MONETARY POLICY OF INDIA 1) 2) GROWTH WITH STABILITY REGULATION . SUPERVISION AND DEVELOPMENT OF FINANCIAL STABILITY PROMOTING PRIORITY SECTOR GENERATION OF EMPLOYEMENT 3) 4) .

5) EXTERNAL STABILITY 6) ENCOURAGING SAVINGS AND INVESTEMENTS REDISTRIBUTION OF INCOME AND WEALTH REGULATION OF NBFIs 7) 8) .

1) 2) 3) a) b) 4) GENERAL OR QUANTITATIVE METODS BANK RATE REPO AND REVERSE REPO RATES RESERVE REQUIREMENTS CASH RESERVE RATIO STATUTORY LIQUIDITY RATIO OPEN MARKET OPERATIONS .INSTRUMENT OF RBI’S MONETARY POLICY I.

II. 1) SELECTIVE OR QUALITATIVE METHODS MARGIN REQUIREMENTS DISCRIMINATORY RATES OF INTEREST 2) 3) CEILING ON CREDIT DIRECT ACTION MORAL SUASION 4) 5) .

RECENT CHANGES IN RBI’S MONETORY POLICY 1) MULTIPLE INDICATOR APPROACH EXPECTION AS A CHANNEL OF MONETORY TRANSMISSION INTRODUCTION OF LIQUIDITY ADJUSTMENT FACILITY (LAF) SELECTIVE METHODS BEING PHASED OUT 2) 3) 4) .

5) DELINKING MONETARY POLICY FROM BUDGET DEFICIT DEREGULATION OF ADMINISTERED INTEREST RATE SYSTEM 6) 7) REDUCTION IN RESERVE REQUIREMENTS PROVISION OF MICRO FINANCE EXTERNAL SECTOR 8) 9) .

RBI’S SHORT TERM LIQUIDITY MANAGEMENT  Liquidity management of a central bank is defined as the framework. set of instruments and the rules that the central bank follows in order to manage the amount of money supply to control short term interest rates with the objectives of price stability .

MEASURES USED BY RBI FOR SHORT TERM LIQUIDITY MANAGEMENT 1) STERILIZATION USE OF REPO/ REVERSE REPO INTERIM LIQUIDITY ADJUSTMENT FACILITY(LAF) LIQUIDITY ADJUSTMENT FACILITY INTRODUCTION OF MARKET STABILIZATION SCHEME (MSS) 2) 3) 4) 5) .

EVALUATION OF MONETARY POLICY ACHIVEMENTS 1) FINANCIAL STABILITY SHORT TERM LIQUIDITY MANAGEMENT ADAPTABILITY 2) 3) 4) FINANCIAL INCLUSION PROMOTION OF GROWTH 5) .