The document discusses tools used by the Reserve Bank of India (RBI) to control the money market. It outlines key policy rates like the repo rate, reverse repo rate, and bank rate which RBI uses to influence liquidity and interest rates. Required reserve ratios like the CRR and SLR that require banks to hold a certain percentage of deposits in reserves are also mentioned. Current policy rates and lending/deposit rates are provided. The document concludes by stating that monetary policy involves managing money supply and interest rates to impact prices and employment, and that India follows an inflation targeting approach seeking to balance liquidity, inflation, exchange rates.

1. Presented by :- Pankaj Sharma & Nishant Reddy (KIAMS, Harihar)

6. Tools used by RBI to control the money market: Repo rate : the rate at which banks borrow money from RBI. Reverse Repo rate : -RBI increases Repo Rate to reduce liquidity. -Financial markets tighten and there is an increase in yields of securities. Banks tie interest rates to these yields. - Increase in lending and deposit rates. Less spending Bank Rate : is the ROI which RBI charges on the loans and advances it extends to commercial banks and other financial intermediatories.

7. CRR(Cash Reserve Ratio): It is the bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are made to satisfy withdrawal demands and would normally be in the form of flat currency stored in bank vault or in Central Bank.

8. SLR (Statutory Liquidity Ratio): It is the amount which a bank has to maintain in form of cash, gold or approved securities. The quantum is specified as some percentage of total demand and time liabilities(i.e. the liabilities of the bank which are payable on demand at any time, and those liabilities which are approving in one month’s time due to maturity).

9. Current policy rates Bank rate: 6 Repo 7.50 Reverse repo : 6 Reserve ratios CRR: 5.5 SLR: 24 Lending/deposit rates PLR: 12.75-13.25 Savings bank rate:3.5 Deposit rate: 7.5-9.6%

10. Monetary policy - Management of money supply and interest rates by central banks to influence prices and employment Types of monetary policy: Inflation targeting Price level targeting Monetary aggregates Fixed exchange rate Gold standard Mixed policy India follows the INFLATION TARGETING

11. What RBI is trying to Balance? Liquidity in the system Inflation Rates Exchange Rates