The RBI is responsible for formulating and administering monetary policy in India. Monetary policy uses various tools at the central bank's disposal to influence money supply and credit in order to regulate aggregate demand. These tools include bank rate, repo rate, open market operations, cash reserve ratio, selective credit control, and moral suasion. While RBI has used various instruments for credit control, their effectiveness has been limited due to factors such as other sources of funding for banks, lack of coordination between monetary and fiscal policy, and the existence of a parallel economy. Monetary policy is most effective when coordinated closely with fiscal policy.

1. Monetary Policy and Credit
Management of the RBI
Presented To: Ms.Megha.Kamat
Canara College
Mangalore
Presented By: Shailaja
Canara College
Mangalore

2. The RBI has been constructed as an apex authority for monetary management.
Its primary function is to formulate and administer monetary policy. Monetary
policy refers to “ the use of instruments with in the control of the Central bank to
influence the aggregate demand for goods and services by regulation of the
money and supply and credit”
Introduction

3. Methods of Credit Control
Bank Rate
Repo Rate
Open Market Operations
Variation in the Cash Reserve Ratio
Selective Credit Control
Moral Suasion

4. Evaluation of RBI’S Credit Control Policy
The RBI used bank rate, open market operations and variable cash reserve ratios as
instruments of monetary control in India. There are selective methods of credit control as
well. The bank has followed the monetary policy in such a way that credit needs are met for
production purposes, but credit facilities are restricted for speculative purposes.
There have been some other causes responsible to the limited effectiveness of RBI’S Credit
Control Policy. These are:
Availability of funds to banks from different sources, reducing their dependence on the
RBI.
Little coordination between monetary and fiscal policies.
Yields on government securities do not match with the money market conditions.
Existence of parallel economy.

5. Conclusion
Monetary policy cannot function effectively without a suitable
coordination with the fiscal policy. It is essential that both the polices
should move in tandem.

6. Bibliography
Seth.M.L. Money, Banking, International Trade and Public Finance. Laxmi Naran Agarwal