Monetary policy refers to actions taken by governments through changing money supply and interest rates to achieve macroeconomic goals like economic growth and price stability. Monetary policy tools include open market operations, bank rate changes, cash reserve requirements, and statutory liquidity ratios that are used for both expanding credit and controlling credit. The Reserve Bank of India pursues an accommodative monetary policy to support economic recovery while maintaining inflation targets. Major considerations for monetary policy include consolidating recovery and inflationary pressures. Limitations include time lags and non-bank financial institutions impacting policy transmission.

3. Macroeconomic Policy
Macroeconomic policy refers to action
taken by the government through the
different policies to achieve the
macroeconomic objectives of the
economy.

4. MONETARY POLICY
Monetary policy is an operation by the
monetary authorities of the country and it
operates through changes in the quantity of
money .Thus its immediate impact is felt in
the money market

5. MONETARY POLICY
The authorities designed to influence (a) the
supply of money (b) cost of money or rate of
interest and (c) the availability of money.”

6. OBJECTIVES OF MONETARY
POLICY
To accelerate the process of economic growth.
Controlled expansion.

7. MEASURES OF MONETARY
POLICY
(A) Measures for expansion of currency and credit.
(B)Measures for controlling of credit.

8. (A) Measures for currency and
credit expansion
1) Revision of open market operation.
2) Deficit financing.
3) Anti – inflationary fiscal policy.
4) Allocation of credit.

9. (B) Measures for controlling of
credit
General or Quantitative measures.
a. Bank rate.
b. Open market operations.
c. Cash reserve requirements.
d. Statutory liquidity ratio.

10. EVALUATION OF MONETARY
POLICY
Minor and restricted role in economic development.
Lack of coordination between monetary and fiscal policy.
Imbalance in credit allocation.
Unsatisfactory role of capital market.
Excessive budgetary deficit and government borrowings.
Excessive increase in bank credit to the commercial sector.
Limited role in curbing the inflationary pressures.
Increased liquidity of commercial banks.
Existence of BLACK MONEY.
Under developed money market.

11. SUGGESTIONS of the
CHAKRAVARTY COMMITTEE
Price stability.
Non – Inflationary financing of plans.
Monetary targeting.
Co-ordination of monetary and fiscal policies.
Interest rate policy.
Credit planning.
Restructured money market.
Priority sector lending.
Role of RESERVE BANK for the conduct of monetary policy.

12. MONETARY POLICY 2014 -
2015
In the wake of the global economic crisis, the reserve bank pursued an
accomodative monetary policy beginning mid – september 2008. This
policy instiled financial crises on the economy and ensured that the
economy started recovering aheadof most of the other economies.
The monetary policy response in INDIA since October 2009 has been
caliberated to India`s specific macroeconomic conditions.

13. Highlights of RBI monetary
policy statement (2015-16)
1) Short-term lending rate (repo) unchanged at 7.5%.
2) Cash Reserve Ratio unchanged at 4%.
3) Retains Statutory Liquidity Ratio at 21.5%.
4) Estimates GDP growth at 7.8% in FY’16, up from 7.5% in FY’15 .
5) Forecasts CPI inflation at 5.8 pc by March 2016.
6) 100% CPI inflation to dip to 4% in August 2015.
7) Hailstorms in March affected 17% of the rabi crop sown area .
8) Future rate cuts will depend on interest rate reduction by banks.
9) India better prepared to deal with volatility post US Federal Reserve rate
action.
10) State cooperative banks to be allowed to set up off-site/ mobile ATMs
without prior approval from RBI.
11) State cooperative banks to be allowed to set up off-site/ mobile ATMs
without prior approval from RBI.

14. Major conditions on which
monetary policy has been formed
Consolidating Recovery.
Accentuated Inflationary Pressures.
Higher Issuance of Securities.

15. Limitations
1) The existence of a time lag .
2) The presence of non-bank financial intermediaries .
3) The underdeveloped nature of the money and capital market