2. Introduction
• Monetary policy is the macroeconomic policy laid
down by the central bank. To maintain liquidity,
the RBI is dependent on the monetary policy.
• Monetary policy refers to the use
of monetary instruments under the control of the
central bank to regulate magnitudes such as
interest rates, money supply and availability of
credit with a view to achieving the ultimate
objective of economic policy.
4. 1951-90
• Change in Bank rate
• Open Market Operations
• Cash Reserve ratio (CRR)
• Statutory Liquidity Ratio (SLR)
• Selective Credit Control
5. After 1991----
• Reduction in Bank rate
• Open Market Operations
• Cash Reserve ratio (CRR)
• Repo Rate
• Selective Credit Control
• Moral Suasion
• Direct Action
6. Objectives
• Exchange Rate stability
• Distrust of foreign capitalists
• Encouragement of speculation
• Bad effect on International price level
• International co-operation
• Price stability (1929-1933)
• Full employment
7. Objectives
• Economic development
A. Efficient payment machinery
B. Encouragement of investment
C. Expansion of financial system
D.Creation of new financial institutions
E. Solution of balance of payment problem
8. Limitations
• Ineffective in depression
• Non & Monetary factors
• Frequent changes in rate of interest
• Mutual contradictory objectives
• Different conditions
• Lack of money Market
9. Failures of policy
• Excess cash reserve with bank
• Non-control on non banking institution
• Financial indiscipline
• Limited working field
• International monetary crisis
• Existence of capital market
10. Failures of policy
• Wider circulation of black money
• Lack of monetary targeting
• Slow growth of money market
• Use of E-Money
