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• Meaning of Monetary Policies :
Introduction
Definitions
• Objective of Monetary Policies(with ref to RBI) :
Rapid Econom...
• Features & Instruments of Monetary Policy
- Quantitative & Qualitative Tools:
Qualitative:
Bank Rate Policy (BRP)
Open M...
Part 1 : Meaning of Monetary Policies
Monetary Policy
RBI’s Credit
management
Policy
Credit Policy
1.1 Introduction
Supply
of Money
Viability
of Money
Ratio of
Interest
How Much Should Be the :
Monetary Policies Addresses the Following Qu...
1.2 DEFINITIONS OF MONETARY POLICIES
According to Prof. Harry
Johnson,
"A policy employing the central
banks control of th...
Part 2: Objectives of Monetary Policy
“ Objectives of Monetary Policies are similar to the objectives of five year plan ”
In a nutshell , Planning in India aims...
2.1 Brief Overview of the Objective of
Monetary PoliciesRapidEconomicGrowth
• Most
Important
objective.
• Control of
Inter...
BalanceofPaymentEquilibrium(BOP)
• Developing
Countries like
India face
Disequilibri-
um of BOP
• Monetary
Policies Tries
...
Part 3 :Features & Instruments of Monetary
Policy - Quantitative & Qualitative Tools
3.1 Features & Instruments of Monetary
Policy - Quantitative & Qualitative Tools
• The instrument of monetary policy are t...
3.2 Quantitative Instruments or
General Tools
Bank Rate Policy(BRP)
Open Market Operation(OMO)
Variation in the Reserve Ra...
BankRatePolicy(BRP)
• Used for Influencing
the volume or
quantity of credit in
the Economy
• The standard rate at
which th...
3.3 Qualitative Instruments or
Selective Tools
Fixing Margin Requirements
Consumer Credit Regulation
Publicity
FixingMarginRequirements
• Refers to the
proportion of loan
amount not
financed by the
bank
ConsumerCreditRegulation
Publi...
Roger gomes  monetary policies-its objective , meaning and defenition
Roger gomes  monetary policies-its objective , meaning and defenition
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Roger gomes monetary policies-its objective , meaning and defenition

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A presentation done as a part of the course industrial Economics and Telecom Regulation during Semester 6 of the 4 year under graduate degree course in engineering

This presentation describes all the aspects related to the Monetary policies adopted by the Reserve bank of India(RBI)

Published in: Economy & Finance, Business
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Transcript of "Roger gomes monetary policies-its objective , meaning and defenition"

  1. 1. • Meaning of Monetary Policies : Introduction Definitions • Objective of Monetary Policies(with ref to RBI) : Rapid Economic Growth Price Stability Exchange Rate Stability Balance of Payments (BOP) Equilibrium Full Employment Neutrality of Money Equal Income Distribution
  2. 2. • Features & Instruments of Monetary Policy - Quantitative & Qualitative Tools: Qualitative: Bank Rate Policy (BRP) Open Market Operation (OMO) Variation in the Reserve Ratios (VRR) Quantitative: Fixing Margin Requirements Consumer Credit Regulation Publicity
  3. 3. Part 1 : Meaning of Monetary Policies
  4. 4. Monetary Policy RBI’s Credit management Policy Credit Policy 1.1 Introduction
  5. 5. Supply of Money Viability of Money Ratio of Interest How Much Should Be the : Monetary Policies Addresses the Following Questions:-
  6. 6. 1.2 DEFINITIONS OF MONETARY POLICIES According to Prof. Harry Johnson, "A policy employing the central banks control of the supply of money as an instrument for achieving the objectives of general economic policy is a monetary policy." According to A.G. Hart, "A policy which influences the public stock of money substitute of public demand for such assets of both that is policy which influences public liquidity position is known as a monetary policy."
  7. 7. Part 2: Objectives of Monetary Policy
  8. 8. “ Objectives of Monetary Policies are similar to the objectives of five year plan ” In a nutshell , Planning in India aims at Growth, Stability and Social Justice. Objectives Rapid Economic Growth Price Stability Exchange Rate Stability Balance of Payments Equilibrium Full Employment Neutrality of Money
  9. 9. 2.1 Brief Overview of the Objective of Monetary PoliciesRapidEconomicGrowth • Most Important objective. • Control of Interest Rate • Maintaining Income and Price Stability PriceStability • Inflation and Deflation • To keep Money value Stable • Reduces Wealth and economic Insecurities ExchangeRateStability • House Currency expressed in terms of Foreign Currency • Extremely Volatile • Maintaining relative stability in the exchange rate
  10. 10. BalanceofPaymentEquilibrium(BOP) • Developing Countries like India face Disequilibri- um of BOP • Monetary Policies Tries to maintain Equilibrium • BOP Surplus and BOP Deficit FullEmployment • Absence of Involuntary Employment • Monetary policy is expansionary then credit supply can be encouraged • Helps in Creating Jobs EqualIncomeDistribution • Monetary policy can help and play a supplementary role in attainting an economic equality • Monetary policy can make special provisions • Monetary policy can help in reducing economic inequalities among different sections of society. 2.1 Brief Overview of the Objective of Monetary Policies(Contd.)
  11. 11. Part 3 :Features & Instruments of Monetary Policy - Quantitative & Qualitative Tools
  12. 12. 3.1 Features & Instruments of Monetary Policy - Quantitative & Qualitative Tools • The instrument of monetary policy are tools or devise which are used by the monetary authority in order to attain some predetermined objectives. There are two types of instruments of the monetary policy: Quantitative Instruments or General Tools Qualitative Instruments or Selective Tools
  13. 13. 3.2 Quantitative Instruments or General Tools Bank Rate Policy(BRP) Open Market Operation(OMO) Variation in the Reserve Ratios (VRR)
  14. 14. BankRatePolicy(BRP) • Used for Influencing the volume or quantity of credit in the Economy • The standard rate at which the bank is prepared to buy or rediscount bills of exchange or other commercial paper eligible for purchase under the RBI Act OpenMarketOperation(OMO) • Buying and selling of Securities by the RBI to maintain supply of money in the Economy • Reducing Purchasing Power during Inflation by selling • During Recession or Depression buying securities to supply money VariationintheReserveRatios(VRR) • Cash Reserve Ratio(CRR) and Statutory Liquidity Ratio(SLR) • CRR – 3-15% SLR- 25-40% • VRR=CRR+SLR • Brings about change in cash reserves thus affecting commercial banks lending capacity. 3.2 Quantitative Instruments or General Tools
  15. 15. 3.3 Qualitative Instruments or Selective Tools Fixing Margin Requirements Consumer Credit Regulation Publicity
  16. 16. FixingMarginRequirements • Refers to the proportion of loan amount not financed by the bank ConsumerCreditRegulation Publicity 3.3 Qualitative Instruments or Selective Tools • This method is used to encourage credit supply for the needy sector and discourage it for other non- necessary sectors. This can be done by increasing margin for the non-necessary sectors and by reducing it for other needy sectors > Under this method, consumer credit supply is regulated through hire-purchase and installment sale of consumer goods > the down payment, installment amount, loan duration, etc is fixed in advance. > This can help in checking the credit use and then inflation in a country. >Central Bank (RBI) publishes various reports stating what is good and what is bad in the system. > This published information can help commercial banks to direct credit supply in the desired sectors. >Through its weekly and monthly bulletins, the information is made public and banks can use it for attaining goals of monetary policy.
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