The document discusses monetary policy in India. It defines monetary policy as how the central bank (Reserve Bank of India) controls money supply to maintain price stability and economic growth. In India, RBI announces monetary policy twice a year to regulate price stability. It outlines the objectives of monetary policy in both developed and developing countries. The document also explains the tools used in monetary policy, including cash reserve ratio, statutory liquidity ratio, repo rate, reverse repo rate, and open market operations. It provides current rates for indicators like inflation, bank rate, CRR, and repo rate. The goals of monetary policy are listed as economic growth, interest rate stability, and stability in the foreign exchange market.

1. MonetAry Policy

2. CD Deshmukh
The First Indian Governor of
Reserve Bank of India (RBI)
DR.Urjit Patel
Present Governor of
Reserve bank of India (RBI)

3. Monetary policy
Monetry policy is the process by which monetry authority of
a country, generally a central bank control the supply of
money in the economy by its control over intersest rates in
order to maintain price and stability and achieve high
economic growth.
In INDIA,RBI controls the monetary policy. It is announced
twice a year, through which RBI,regulate the price stability
for the economy.
1.slack season policy April-September
2.Busy season policy October-March

4. objective
 Objectives are classified in two aspects
 Under developed countries
Developed countries

5. Under developed countries
• To achieve full employment
• To have high Efficiency
• To have large scale of resources mobilization
• To increase Exports
• To have high investment
• To provide price and exchange stability
• To have efficient allocation and utilization of resources
• To raise living standards

6. Developed countries
• To have high aggregate demand without inflation
• Eradicate inflationary and deflationary gap
• High research/ further development
• Providing assistance to other countries
• Gaining monetary control over others

8. Expansionary monetary policy is appropriate when the
economy is in recession and unemployment is a problem.
The goal of expansionary monetary policy is to reduce
unemployment. Therefore the tools would be an increase in
the money supply.
To increase the money supply the federal government can:
• Buy government bonds(open market purchase)
• Lower the interest rate
• Lower the reserve ratio

9. Contractionary monetary policy is appropriate when
economy is in expansion and inflation is a problem. The
goal of contractionary monetary policy is to reduce inflation.
Therefore the tool would be the decrease in the money
supply.
To decrease the money supply the federal reserve can:
• Sell government bonds(an open market sell)
• Raise the interest rate
• Raise the reserve ratio

10. Tools of Monetary Policy
Quantitative
CRR
SLR
Bank Rate
Repo Rate
Reverse Repo Rate
Marginal standing Facility
Rate
Open Market Operation
Qualitative
Margin/LTV
Consumer Credit Control
Ratioing
Moral Suasion
Direct Action

11. CRR- Cash Reserve Ratio
 It is the ratio of Deposits which banks have to
keep with RBI. Under CRR a certain
percentage of the total bank deposits
has to be kept in the current account
with RBI. Banks don’t earn anything on that.
SLR- Statutory Liquidity Ratio
 Besides CRR, Banks have to invest
certain percentage of their deposits
in specified financial securities like
Central Government or State Government
securities. This percentage is known as
SLR.

12. Bank Rate
 It is the rate at which RBI gives loan to commercial banks without keeping
any collateral.
Repo Rate
 when banks need money they approach RBI. The rate at which banks
borrow money from the RBI by selling their surplus government securities
to the central bank (RBI) is known as “Repo Rate.”
Reverse Repo Rate
 Reverse repo rate is the rate of interest offered by RBI, when banks deposit
their surplus funds with the RBI for short periods. When banks have surplus
funds but have no lending (or) investment options, they deposit such funds
with RBI. Banks earn interest on such funds.

13. Marginal Standing Facility
 Marginal Standing Facility is a new Liquidity Adjustment Facility (LAF)
window created by Reserve Bank of India in its credit policy of May
2011. MSF is the rate at which the banks are able to borrow overnight
funds from RBI against the approved government securities.
Open market operations
 Open market operations (OMO) refers to the buying and selling of
government securities in the open market in order to expand or
contract the amount of money in the banking system, facilitated by
the Federal Reserve (Fed).

14. Current Rates
Indicator Current Rate
Inflation 6%
Bank Rate 7%
CRR 4%
SLR 21%
Repo Rate 6.50%
Reverse Repo Rate 6%
Marginal Standing Facility Rate 7%

15. Economic
growth
Interest rate
stability
Stability in
foreign
exchange
market
Goals of Monetary Policy