The document discusses the objectives and instruments of monetary policy in India. The objectives are to achieve stability in prices, full employment, economic growth, equal distribution of income and wealth, and a stable exchange rate. The key instruments of monetary policy discussed are the cash reserve ratio, bank rates, open market operations, statutory liquidity ratio, repo/reverse repo rates, credit ceilings, margin lending rates, directed credit controls, and moral suasion.

2. Content
01 •Introduction
02 •Objectives
03
•Instruments

3. INTRODUCTION:
• Monetary policy……….…..?
• What it all about……….….….?
• Who is controlling ….……….....?

4. OBJECTIVES/AIMS OF THE POLICY:
• Stability in price.
• Full employment.
• Economic growth.
• Equal distribution of income and wealth.
• Stable exchange rate.

6. CRR
Quantitative Bank Rates
OMOs
Instruments of MP
Credit Ceiling
Change in
Margin Lending
Qualitative
Directed Credit
Control
Moral Suasion

8. Cash Reserve Ratio(CRR):
What is CRR……..?
Banks in India are required to hold a certain proportion of
their deposits in the form of cash which is known as CRR.
What is current CRR…….?
6% (from 24/04/2010) [ RBI empower to vary b/w 3%-
15%]
How it controls money supply in
economy……?
↑ CRR-------→ ↓ money with bank leads to low supply.
↓ CRR-------→ ↑ money with bank leads to high supply.

9. Bank Rates
What is bank rate………..?
The rate at which central bank (RBI) lends money to
other banks or financial institutions.
What is present bank rate…….?
6% (from 29/04/2003)
How it controls the money supply……….?
↑ bank rates → → → → → ↑ interest rates in commercial
banks leads to low barrowings.
↓ bank rates → → → → → ↓ interest rates in commercial
banks leads to high barrowings.

10. OMOs
• Expand:
Open Market Operations.
• What it means………….?
Broad sense: purchase and sale of variety of assets by central
banks.
Indian sense: purchase and sale of government securities.
• How it controls money supply…….?
To increase MS → → → RBI buys securities.
To reduce MS → → → RBI sells securities.

11. Other instruments:
• SLR:
• the minimum percentage of deposits that the bank has to
maintain in form of gold, cash or other approved
securities.
• present SLR 24% (from 18/12/2010).
• RBI empower to increase up to 40%.
• REPO:
• the rate at which the RBI lends shot-term money to the
banks against securities. (8.5%)
• Reverse REPO:
• the rate at which banks park their short-term excess
liquidity with the RBI. (7.5%)

13. • Credit ceiling:
• Ceiling on the highest amount and time of credit for certain
purpose.
• Margin lending:
• maximum margin for lending against specific securities.
• Discriminatory rates:
• Different rate of interest charged on certain type of advances.

14. Moral suasion:
• An application of pressure, but not force, by an authority
(such as the Federal Reserve Board) to get members to
adhere to a policy.
• Non-official' tool of monetary policy which governments
employ.

15. "The man who acquires
Thank
the ability to take full
possession of his own
mind may take
You
possession of anything
else to which he is
justly entitled."