INSTRUMENT OF MONITERY POLICY

Ankesh C.Baikar Prakash Sonavne

CENTRAL BANK
Central bank is the apex monetary institution who regulate, control, operate whole banking system in a country. Each country has its own central bank. Which is form to keep control and restriction on the working of the commercial banks in a country. Reserve Bank of India The Reserve Bank of India is the Central bank of a India. Which is form or develop in a year 1934. from that day RBI helps to keep balance of monetary conditions in a country. and not only in a banking sector but also in capital market varies functions are carried out by the RBI. Which involve maintain stability in a money supply, money circulation, and provided money in a whole country.

PURPOSE FOR WHICH MONETARY POLICY ARE USED To control Inflation To control Deflation That is to control Recession Activities of commodity and capital market Money circulation in a country Foreign Exchange Control over commercial banks Small credit banks

MONETORY POLICY
Monetary Policy is nothing but whatever functions or activities carried out by central bank relating to money is term as Monetary Policy.

Instruments of Monetary Policy

The instruments of Monetary Policy classified into

General or Quantitative Instrument Specific or Qualitative Instrument

General or Quantitative Instrument of monetary policy

The general instrument are maro-ecomomic in impact and are used to control the volume of credit so as to control the Inflationary and Deflationary pressures caused by business cycles. Following are the instruments of this method

Bank Rate Open Market Operation Cash Reserve Ratio

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Quantitative Method

Decrease

Increase

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Column1 Series 2 Series 1

Quantitative Method

Increase

Decrease

SELECTIVE OR Q UALITATIVE INSTRUMENTS OF MONETARY POLICY

The Selective Instrument of Monetary Policy are evoked to influence the use and volume of credit available for particular purpose in specific sector of the economy. They are as follows

Margin Requirement : Regulation of consumer credit : Issue of Directives :

Credit Rationing :

Moral Suasion and Publicity :

Direct Action :

Thank You