Monetary Policy: Targets , goals, Advantages, and Quantitative and qualitative measurment

3. WHAT IS MONETARY POLICY?
It is how central bank manage
Liquidity to create economic growth.
.

4. • It is formulated
and executed by
“Reserve Bank of
India” to achieve
specific
objectives.

6. TYPES
Of
Monetary Policy
ExpansionaryContractionary

7. • Rationing of credit
• Moral Suasion
• Direct ActionQualitative
Measures
• Bank Rate
• Open Market Operations
• CRR
• SLR
• Repo Rate
• Reverse Repo Rate
Quantitative
Measures

8. CRR
1. Kept with RBI.
2. Rate ranges
between 3%- 20%.
3. Used for nothing.
SLR
1. Kept with itself.
2. Rate ranges up to
40%.
3. Used for buying
government
securities.

9. Promote low inflation rates.
Promotes transparency and
predictability.
Promote political freedom.
Lead to lower rates of mortgage
payments.

10. Take time to be implemented.
Does not guarantee economy
recovery.
Discourage businesses to expand.

11. • Economic growth and stability.
• Controlling Inflation.
• Reducing the impacts of business cycles.
• Maintaining stability of exchange rate.

12. Decrease in discount
rate
Purchases of
government securities
Reduction in Reserve
Ratio

13. Monetary Policy
• Involves changing
the interest rate and
influencing the
money supply.
Fiscal Policy
• Involves the
government
changing tax rates
and levels of
government
spending to
influence aggregate
demand in the
economy.

14. Money
Supply Interest Rates

15. Credit Quality.
Short Term Interest Rates.
Long Term Interest Rates.
Exchange Rates.
Bonds & Equities.

16. Increase/
Decrease Repo
Reverse
Repo CRR SLR
Increase Increase Reduced Reduced Reduced
Decrease Reduce Increase Increase Increase

17. Monetary Measures
Fiscal Measures
Price Control

18. Lower the
exchange rate
Weaken the
financial
account
Strengthen
the current
account

19. Repo Rate 6.00%
Reserve Repo Rate 5.75%
Bank Rate 6.25%
Marginal Standing Facility
(MSF) Rate 6.25%
Cash Reserve Ratio (CRR) 4.00%
Statutory Liquidity Ratio
(SLR) 20.00%