CAB CALLING

Introduction
Monetary policy is an important constituent of overall economic policy towards the pursuit of various economic goals, including expansion of employment, higher economic growth, and maintenance of price stability. Over the past century, the prominence of monetary policy has been on a steady rise, and presently, hardly a day goes by without some mention of monetary policy appearing in the headlines. Economists and market analysts are making considerable efforts towards continuous speculation about the likely future actions of the monetary authorities across the matured and the emerging economies. With development of a broad based financial market in India and greater integration with the rest of the world, monetary policy has assumed increasing significance in recent years. Banking sector plays a critical role in transmitting monetary policy action to spending decisions of consumers and investors, and ultimately affecting output and prices. Monetary policy, which involves regulation of money stock or short term interest rate, affects various kinds of economic and financial decision making, such as purchase of a house, car or consumer durables; starting up or expanding a business; investment in a new plant or equipment through its influence on cost and quantum of credit. Through its impact on the spending decisions of the public on goods and services, monetary policy imparts its influence on aggregate demand, and thus, on output and prices. Given the importance of banks in transmission of monetary action to spending decisions, and ultimately achieving the final objectives of economic growth and price stability, the present paper attempts to present the working of monetary policy to bankers and general public.

April-June, 2008

Monetary Policy of the Central Bank: Simplifying the Mystique
Amaresh Samantaraya*
Recently, Dr. Y.V. Reddy, Governor, Reserve Bank of India (RBI) has highlighted greater challenges for monetary policy communication in a market oriented environment in India at present in view of the stakeholders becoming larger and wider and the monetary policy by itself assuming increasing complexity in terms of operating framework and instruments (Reddy, 2008). There is an increasing recognition of the importance of market expectations and public perceptions enhancing monetary policy effectiveness. In this perspective, the present paper attempts to promote better public understanding and seeks to answer what is it that the monetary authorities do, and how they do it?

*Assistant Adviser, Monetary Policy Department, Reserve Bank of India, Mumbai. The views expressed in the paper are strictly personal. Errors and omissions, if any, are the sole responsibility of the author. The usual disclaimers apply.

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In view of greater integration of financial market both at home and across the geographical boundaries. we basically mean that they are so rich that they can buy almost anything they want. For them. Broad money includes time deposits (fixed deposits) in addition to constituents of narrow money. Monetary policy involves regulation of money stock or the short term interest rate to attain monetary policy objectives such as stabilization of output and prices. In the recent decades. 'money' refers to 'wealth'. because we cannot buy a meal or shirt with this form of assets without selling those for cash. government debt management. and (ii) broad money are widely used in the discussion of monetary policy. as it enjoys considerable control on regulation of money stock through its monopoly over issue of currency. bank deposits against which cheques are drawn are as good as cash and can be treated as 'money'. across the countries. economists and central Exhibit 1: Framework of Monetary Policy · Reserve Requirements Standing Facilities & Central Bank Refinance Rates Open Market Operations (including Repo) Moral Suasion Instruments · · · Operating Targets · · Bank Reserves Short-term Money Market Rates Intermediate Targets · · · Monetary/Credit Targets Long-term Interest Rates Foreign Exchange Rate Objectives · · · Price Stability Output/Employment Financial Stability 18 . The measure of narrow money includes currency in circulation plus demand deposits (current account and other chequeable deposits) in the economy. (i) narrow money. let us now discuss the broad outline of monetary policy framework and sequence of steps involved in the conduct of monetary policy (Exhibit 1). respectively. foreign exchange management. there is a definite trend towards making monetary policy more and more sensitive to the objectives of attaining and maintaining output and price stability. the objective of ensuring financial stability is also gaining increasing importance. and creation/ destruction of bank reserves. narrow money and broad money are denoted as M1 and M3. Technically. we shall start with discussing what 'money' is. Broad Monetary Policy Framework The role of monetary policy. 'money' is the set of assets in the economy that is used regularly by the people to purchase goods and services from other people conveniently. the Reserve Bank of India is the monetary authority in addition to its other responsibilities including regulation and supervision of the banks. broadly outlines the salient features of conduct of monetary policy in India. In this sense. In India. RBI (1998) provides detailed discussion on the conceptual and methodological issues related to monetary aggregates in India. Glossary of terms related to conduct of monetary policy in India is presented in the Appendix. other forms of assets such as a building or a car are not considered as money. and guides how to read/interpret the monetary policy statements as announced by the RBI Governor. In this backdrop. 2008 bankers use the word 'money' in a more specific sense. In Indian context. banker to government. two forms of money stock viz. The responsibility for the conduct of monetary policy generally rests with the central bank of the country. has seen a fundamental transformation over time.CAB CALLING April-June. The cash in our wallet is money because we can use it to buy a meal at a restaurant or a shirt from a store. However. Similarly. As 'money' plays an important role in monetary policy. The rest of the paper presents the monetary policy framework in general. However. When we say some have a lot of money.

beginning with New Zealand and followed by a sizeable number of countries both advanced and emerging. foreign exchange swaps find wide application. there has been a debate on assigning single or multiple objectives to monetary policy (Rangarajan. April-June. an array of indirect instruments such as open market operations (OMO) including repo transactions in domestic securities.CAB CALLING In the conduct of monetary policy. The relationship between money stock and bank reserves are derived from the 'money multiplier' equation (for details please see RBI. pursuing single objective is critricised on the grounds that it encourages conservatism on the part of the central bank and gives rise to policy bias towards low inflation. the objectives are quantified in terms of inflation rate or output/employment growth (say 2 or 5 per cent). output/employment augmentation. lack of conclusive evidence supporting the claim of long run growth neutrality of monetary policy and the very measurement of potential output. money stock measures. Subsequently. In the theoretical plane. The choice of 'intermediate target' is largely based on its close and predictable link with the final objectives as well as ability of the monetary authority to exercise reasonable control over it. Country specific conditions as also evolving macroeconomic environment in an economy determine emphasis on either of these objectives. 2008 However. many developing and emerging economies prefer pursuing multiple objectives. In general. World over. it is most important to note that the final objectives of monetary policy as discussed above are not under its direct control in most cases. Depending on the macroeconomic environment and global developments. After estimating the desired level/rate of intermediate targets. inter alia. These monetary policy instruments alter the liquidity conditions in the system and accordingly influence operating targets such as bank reserves or short term interest rates in the desired manner. which might be sub-optimal from the point of view of economic growth and social welfare. high susceptibility of the economy to domestic and external shocks. In recent times. 1985). However. monetary base particularly. Similarly. low level of market integration. Variation of interest rates also influences foreign exchange rate (another intermediate target) through its impact on cross-border capital flows. Central banks in these countries have been given necessary autonomy to wield sufficient independence and flexibility over the management of interest rates and money supply towards fulfilling the 'inflation target'. To emphasize. 2002). the list of monetary policy objectives includes price stability. a consensus has emerged in the case of industrially advanced countries that monetary policy is best suited to pursing the goal of price stability. As a first step. current short term interest rate (operating target) combined with information on expected future short term interest rates influence the shape of medium term interest rates (intermediate target). By now. accordingly. Arguments in favour of single objective are in terms of clarity of the goal. foreign exchange rate and interest have been used as intermediate targets by various central banks depending on the country specific situation. RBI (1985) provides the technical details of the related exercise. ensuring commitment of the central bank to achieve this goal and enabling the public to evaluate the success of the central bank in terms of a single yardstick. appropriate growth rate of money stock consistent with achieving particular inflation rate and output growth rate is derived from the money demand equation. Traditionally. Depending on the objectives to be achieved as set in quantitative terms. the desired level (rate) of the 'operating target' is arrived at based on the estimates of the desired level of 'intermediate target'. the ball rolling starts with preparing the set of objectives desirable to be achieved through monetary policy actions. the first step in the formulation of monetary policy involves clearly defining its objectives. instruments in the form of standing refinance facilities and statutory reserve requirements have been very useful in liquidity management. Timbergen's 'assignment rule' implies that the instrument of monetary policy should pursue a single objective of price stability which is most suitable for it. due to several considerations. as medium term interest rates consist of a series of short term interest rates over time. For example. Generally. Hence. 19 . On the other hand. the mode and frequency of their use and related issues in order to influence the 'intermediate target'. the task at hand boils down to employing the appropriate set of policy instruments in order to achieve the desired level for the operating target. Another related issue pertains to conflict among few objectives. bank reserves and short term money market rates are used as the 'operating targets'. have also gone for direct targeting of inflation. and necessary balancing in case of multiple objectives. and financial stability including ensuring comfortable balance of payments conditions. the operating procedure of monetary policy tactically decides the appropriate 'operating target' and the set of policy instruments. so that a single objective of monetary policy get entrenched into their economic system as a public commitment of the central bank. Many countries. the monetary authority has to rely on appropriate 'intermediate targets'. consistent level/rate of intermediate target is arrived at.

open market purchase of government securities injects liquidity in the banking system. rests with a committee/group at senior/middle management level or at department level responsible for market operations. On the other hand. Patra and Samantaraya (2007) provide a comprehensive account of monetary policy decision making in select central banks covering both matured and emerging economies. banks' decision on lending rates based on the signals from the monetary authority (in the form of variation of bank reserves or policy rates) critically influence spending decisions. India. In the standard textbook approach. the Governor of the central bank solely take monetary policy decisions in terms of variation of policy instrument. as monetary action affects final objectives after certain time lags. The preamble to 20 . of course. generally after 6 to 24 months. The propagation of monetary impulses through the interest rates as explained above is known as monetary transmission through 'interest rate channel'. Of course. may be inimical to softlanding in terms of ultimate effect of monetary policy on output and prices. Banks play a very important role in monetary policy operations. Sweden. with developed financial market. targets and instruments of monetary policy evolve over time. the 'credit channel' comes into picture. Moreover. in Brazil. the United Kingdom and the United States. Various dimensions of monetary policy operations vary across the countries depending upon the structure of the economy. Israel and New Zealand. which ultimately leaves its impact in achieving the final objectives. which in turn affects aggregate demand explained by wealth effect and Tobin's 'Q' (asset price channel). institutional arrangements and level of development of the financial sector. augments banks' deposits with the central banks (bank reserves) and reduces short term interest rates. This puts downward pressure on output and prices. In countries such as Australia. This is true in case of India also. Here also. imprudent behavior of the banking sector which pose threat to financial stability. however. suitable expectation formation by the market and public in general Monetary Transmission Mechanism The monetary transmission mechanism delineates the process through which monetary policy shocks (actions) administered through changes in policy instruments and operating targets influence the final objectives. The analysis of monetary transmission mechanism is crucial for the conduct of effective monetary policy and its importance cannot be overemphasized. Day-to-day liquidity management decisions. Conduct of Monetary Policy in India As discussed in the previous section. institutional arrangements and development of the financial sector.CAB CALLING April-June. Furthermore. Interest rate in the inter-bank money market is the focal point of central bank liquidity operations. variation in interest rate affects asset prices. Canada. policy induced changes in the instruments result in desired changes in appropriate operating and intermediate targets. This makes exports more costly and imports cheaper – compressing 'exports over imports' – and thus. objectives. In an open economy with free capital mobility. It describes the nature and strength of the influence of monetary action and the related lag structure of the effects. Mishkin (1996) provides schematic descriptions of working of the individual channels of monetary transmission. Monetary policy instruments essentially influence liquidity conditions in the system and resultant variation in bank reserves defines the taking off for the monetary policy flight. Similarly. Within a country also. the monetary shocks affect aggregate demand through the channel of 'foreign exchange rate' also. Increase in interest rate augments international capital inflow. as evident in the recent global financial turmoil triggered by the 'subprime' crisis in the United States. variation in bank reserves and short term interest rate set the tone for medium term interest rate. which in turn causes appreciation of domestic currency. 2008 based on central bank credibility reinforces policy effectiveness. There is also considerable variation in the decision making process across the central banks. through the impact of monetary policy on net worth of firms (balance sheet channel) and on bank deposits and credit (bank lending channel). which in turn affects spending decision for housing. Estimation of appropriate amount of liquidity injection to influence the operating targets precisely is a very challenging task for the monetary authority. keeping pace with changes in the structure of the economy. and shapes strength of monetary policy – altitude of the flight. receives suggestions and advices formally or informally for facilitating informed judgment. Thus. reducing aggregate demand. and thus. consumer durables. The lag structure comes into picture. The Governor. For example. a 'monetary policy committee' takes collective decision on monetary policy. tight monetary policy characterized by increase of short term interest rate raises medium term interest rates and dampens aggregate demand through curtailing investment and consumption spending. Korea. as depicted in Exhibit 1. expanding production facilities or working capital requirements. Now. these parameters have experienced steady transformation and modification over time with changing economic environment. the Euro Area.

Consistent with the stance. inflation control and expansion of bank credit to support economic growth constituted as the dominant objectives of monetary policy in India. These initiatives included development and deepening of key segments of the financial market. etc. Mid-term and Third Quarter Reviews. including with regard to flow of bank credit. appropriate monetary policy stance is framed. Ultimately. in the month of July. information content of all these indicators are monitored for assessing the overall macroeconomic environment and evolving global development. administered interest rates and primitive financial sector. freedom to banks in determination of lending and deposits rates except a couple of segments. Relative emphasis was placed on either of them based on the prevailing economic conditions. exchange rate. monetary aggregates. Chakravarty Committee (RBI. Section I reviews and assesses 21 . "to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage". priority sector lending. LAF basically addresses temporary liquidity requirements. generally. Particularly. It was felt that April-June. Based on this assessment and projection of inflation and output growth for the ensuing year. the policy stance generally emphasizes adequate flow of credit to augment consumer and investment spending. information pertaining to other monetary and financial indicators should also be taken into account while formulating monetary policy. phasing out automatic monetization of government deficit through issue of ad hoc Treasury Bills. shrinks/enhances the credit creating capacity of banks – so as influence investment and consumer spending as per the policy stance. It consists of three sections.CAB CALLING Reserve Bank of India Act. are pooled together for drawing policy perspectives. October and January. the Reserve Bank formally adopted a 'multiple indicator' approach in which information on interest rates. respectively. inflation. liquidity adjustment facility (LAF) and recourse to variation in cash reserve ratio (CRR). In the backdrop of the above impediments. Monetary policy in the form of 'credit planning' – regulating the quantum and distribution of credit flow to various sectors of the economy in consonance with national priorities and targets – assumed greater importance since adoption of philosophy of 'social control' and nationalization of banks in late 1960s. During economic slowdown and subdued inflation. Several reform initiatives and institutional changes as part of the comprehensive reforms introduced since early 1990s further strengthened the scope of monetary policy operations. although some overlapping across the phases cannot be ruled out. as a response to unprecedented international capital inflows in recent years. the RBI undertakes active demand management of liquidity through open market operations (OMO) including market stabilization scheme (MSS). By the late 1990s. in the evolving process of conduct of monetary policy in India. this framework suggested desirable growth of money stock consistent with output and inflation objectives of the RBI. Our discussion in this section would be limited to the Governor's Statement on monetary policy. In the recent years. 1985) comprehensively reviewed the functioning of the monetary and banking systems and guided far-reaching transformation in the conduct of monetary policy in India. 'monetary targeting with feedback' was introduced as the basic framework of monetary policy. 1934 sets out the broad outline of the objectives as. a consideration for financial stability in terms of quality of bank credit is also an important input for the evolving policy stance. in this new framework. ongoing financial openness and sweeping changes in the financial sector reoriented the role of interest rates vis-à-vis the quantity variables. Since April 1998. In alignment with the policy stance. capital flows. there has been greater reliance on MSS and CRR to withdraw liquidity which are of the enduing nature. while money aggregates (M3) still acts as an important indicator. a sequence of phases can be clearly discernable. However. With development of a broad-based financial market with closer global inter-linkages. appropriate liquidity is maintained in the system so that adequate/legitimate requirements of credit are met. As enunciated in various policy documents of the Reserve Bank. 'financial stability' is included as another important objective of monetary policy in India. credit. As recommended by the Chakravarty Committee. in the recent period. these instruments attempt to withdraw/inject liquidity in the banking system – and thus. the stance stresses on limiting credit flow only to meet the legitimate requirements such as supporting investment and export demands. 2008 in the evolving situation. As discussed in the previous section. in situations of high inflation and overheating economy. How to Read RBI's Monetary Policy Statement The Governor of RBI announces the Annual Policy Statement in the month of April every year for the corresponding financial year followed by First Quarter. From historical perspective. the policy regime was severely constrained by heavily regulated regime consisting of high level of deficit financing. adoption of prudential norms in alignment with global best practices towards enhancing financial stability. Thus. On the contrary. More details of these instruments are presented in the Appendix..

and borrowing requirement of the government. likely growth of currency and deposits. government securities market. etc. Conceptual and theoretical issues relevant to formulation of monetary policy stance are also touched upon. behaviour of the current and capital account. in simple terms. Finally. the working of monetary policy in India with the objective of making it understandable for the bankers and general public. likely outturn of the government borrowing requirements are assessed. Behaviour of the key segments of the financial market. In view of this. Appropriate nuances are used to explain the policy stance so that the underlying conditions are reflected. As noted by Mohan (2005). Section III of the statement on monetary policy enumerates specific policy measures in terms of variation in the Bank Rate. prices. India's linkages with the rest of the world have been increasing both in terms of trade and financial flows." The second statement clearly assigns a higher weight for the objective of price stability and focuses on meeting genuine credit requirements signifying relative withdrawal of accommodations. Section I summarizes performance of imports and exports. Over the years. In the backdrop of the macroeconomic assessment and taking into account emerging economic scenario.CAB CALLING April-June. stance in the Mid-term Review of Annual Policy Statement 2005-06 was "consistent with emphasis on price stability. reflecting the actions undertaken in alignment with the monetary policy stance. 2008 Statement 2005-06 puts the stance of monetary policy in terms of "provision of appropriate liquidity to meet credit growth and support investment and export demand in the economy while placing equal emphasis on price stability. For example. “the effectiveness of monetary policy will crucially depend on how well the public and market participants understand the central bank signals. Without much technical vigor. Given the influence of government borrowing on market interest rates and credit behaviour of banks. reverse repo/repo rates under LAF. appropriate growth of money supply is projected while taking on board demand for bank c re d i t f ro m d i ff e re n t sectors. equity market and corporate bonds market are also highlighted. emphasis was on explaining conduct of monetary policy in simple language. namely money market. the overall monetary policy stance is presented in Section II.” 22 . Annual Policy Conclusions The present paper attempted to explain. the evolving macroeconomic and global developments in terms of a stock-taking of output and inflation scenario followed by a brief review of monetary and credit growth along with the determining factors. and the movement of exchange rates as also highlights developments in the global economy counting performance of world output. Based on the projections of output growth and inflationary outlook. CRR. Better understanding of the importance and content of policy announcements by the bankers and general public would facilitate improvements in picking up the policy signal appropriately and correct expectation formation. state of the global financial system and monetary policy stance of major economies. provision of appropriate liquidity to meet genuine credit needs and support export and investment demand in the economy." On the other hand.

it serves as a signal to the market and business community about tight or easy monetary policy. LAF Liquidity Adjustment Facility (LAF) of the RBI is a mechanism. GDP Gross domestic product (GDP) is a commonly used indicator measuring aggregate economic activity in an economy. the cost of borrowing from RBI for the banks becomes dearer or cheaper. RBI injects liquidity through repo operations by purchasing government securities. With liquidity management operations. which enables banks to mitigate their short-term mismatches in cash management on a daily basis with RBI. the RBI endeavours to keep the 'call money rate' is generally moves within the corridor formed by the reverse repo rate/repo rate under the LAF. in a year. CRR Cash reserve ratio (CRR) is a legal obligation on scheduled commercial banks to maintain certain reserves in the form of cash with the RBI. In the post-reform period. Inter-bank call money market enables banks to bridge their short-term liquidity mismatches arising out of the day-to-day operations. With some adjustment with regard to depreciation and net factor income from abroad. The LAF operates through daily reverse repo and repo auctions on a fixed rate basis that sets a corridor for the inter-bank call money rate. LAF enables RBI to modulate short term liquidity under varied financial market conditions in order to ensure stable interest rates in the overnight money market. Through its monopoly power over supply of bank reserves. On the other hand. it represents the national income. the RBI is able to influence 'call money rate' which in turn acts as a signal for other market rates. in general. in addition to banks. 1934. At present. Presently. By variation of CRR. With emergence of repo/reverse repo rates under LAF as the effective signaling rates. 2008 Bank Rate is the rate of interest at which the Reserve Bank is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under the RBI Act.0 per cent. reverse repo rate and repo rate under LAF are placed at 6. CRR is required to be maintained as average daily balance on a fortnightly basis. in response to unprecedented surge in foreign capital inflows. the medium term policy was to gradually reduce CRR to its statutory minimum. CRR was reactivated since December 2006 as a monetary policy instrument in the sterilisation process. But. both reverse repo and repo are on overnight basis. instituted in June 2000. Presently. the RBI encourages banks to place liquidity with it through reverse repo operations against the sale of government securities with an agreement to buy it back. It measures the value of all final goods and services produced within an economy during a given period of time. in tight liquidity conditions.0 per cent. the RBI injects or withdraws liquidity by releasing reserves to or sucking reserves from the banking system. respectively. Thus. With raising or lowering of the Bank Rate. CRR is set at 9. When the market is in a surplus liquidity mode. This is the first and foremost link in the transmission of monetary policy action.CAB CALLING Appendix: Glossary of Terms Bank Rate April-June. Call Money Rate 'Call money rate' is the rate of interest at which commercial banks borrow from one another on an overnight basis without recourse to any collateral. as a proportion to their respective net demand and time liabilities (NDTL). primary dealers (PDs) are also eligible to participate in the call money market in India. The Bank Rate was reactivated as the central bank signaling rate since April 1997 by linking it to various rates of refinance. refinance facilities are gradually de-linked from the Bank Rate. At present.0 per cent and 9. 23 .

2008 In the wake of very large and continuous capital inflows and the need for modulating surplus liquidity conditions of enduring nature. Money raised under the MSS is held in a separate identifiable cash account maintained and operated by the Reserve Bank and the amount held in this account is appropriated only for the purpose of redemption and/or buyback of the Treasury Bills and/or dated securities issued under the MSS. Michael Debabrata Patra and Amaresh Samantaraya (2007): “Monetary Policy Committee: What Works and Where”. Variation of SLR alters demand for bank reserves.H. at par with the other government stock OMO Open Market Operations (OMO) involves buying and selling of government securities by the RBI to regulate the liquidity in the banking system.D. RBI Occasional Papers. 3.V. outright OMO has a relatively enduring impact on market liquidity. 11. The current series of WPI with 1993-94 as base year was introduced in April 2000. 2. RBI Bulletin. 4. MSS securities are also traded in the secondary market. SLR is placed at 25 per cent. PP. (1996): “The Channels of Monetary Transmission Mechanism: Lessons for Monetary Policy”. Thesis submitted to the University of Hyderabad. (2008): “The Virtues and Vices of Talking about Monetary Policy: Some Comments”. Reddy. Under the MSS. while promoting soundness in the banking system by ensuring sizeable investment in safe assets.28. 24 . It is published with the shortest possible time lag of two weeks. various issues. PP. 9. 5. Bookwell. N. Ph. Tata McGraw-Hill Publishing Company Limited. Reserve Bank of India. C. RBI Bulletin. PP. Dryden Press. RBI (1998): Report of the Working Group on Money Supply: Analytics and Methodology of Compilation (Chairman: Y. At present.V. and B.1 – 26. SLR Statutory liquidity ratio (SLR) is a legal obligation on banks to invest a certain proportion of their liabilities (NDTL) in specified financial assets including cash. However. Mumbai. and hence. Gregory (1998): Principles of Economics. 5464. Vol. 7. Mishkin. 8.2. New Delhi. NBER Working Paper No. Reddy). References 1. By purchasing (selling) government securities from (to) banks. C. Y. Frederic S. As compared to repo operations under LAF. the cost of market stabilization bonds issued under MSS is borne by the Government of India. It is widely used as a proxy to measure the general price inflation in the economy. Treasury Bills and dated securities of the Government of India are issued. the market stabilisation scheme (MSS) was introduced in April 2004 to equip the RBI with an additional instrument of liquidity management.CAB CALLING MSS April-June. No. Mohan. Amaresh (2003): Transmission Mechanism and Operating Procedure of Monetary Policy in India. Mumbai. Mankiw. WPI The wholesale price index (WPI) in India captures general price movements on weekly basis for all trade and transactions. October. Reserve Bank of India. has an impact on the growth money and credit in the economy. the Reserve Bank enhances (tightens) liquidity in the market. RBI: Annual Report. Rangarajan. July. New Delhi. 10. 1117 – 1125. Samantaraya. (2002): Leading Issues in Monetary Policy. 6. gold and government securities. RBI (1985): Report of the Committee to Review the Working of the Monetary System (Chairman: S. Rakesh (2005): “Communications in Central Banks: A Perspective”. Dholakia (1979): Principles of Macroeconomics. 911 – 919. Chakravarty). Rangarajan. This also facilitates smooth government borrowing.

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