1. MONETARY POLICIES

2. • The Reserve Bank Of India is our central
bank.
• Established in 1935.
• RBI possesses special status in our
country. It’s the authority to regulate and
control the monetary system of our
Country.

3. Monetary Policy
• Definition of Monetary Policy
Monetary policy is a part of economic
policy in which central bank controls the cost
and supply of money and credit by applying
different techniques. It is also one of the main
function of central bank.

4. Objectives of Monetary policy.
 To ensure the economic stability at full
employment or potential level of output.
 To achieve price stability by controlling
inflation and deflation.
 To promote and encourage economic growth in
the economy.

5. Tools Of Monetary Policy
1. General Controls.(Quantitative)
2. Selective Controls.(Qualitative)

6. 1) General controls
a. Bank rate policy.
b. Open market operations.
c. Changing cash reserve ratio.
d. Statutory liquidity ratio.

7. a) Bank Rate Policy
• Bank rate is the minimum rate at which the central
bank of a country provides loan to the commercial
bank of the country.
• Bank rate is also called discount rate because bank
provide finance to the commercial bank by
rediscounting the bills of exchange.
• When general bank raises the bank rate, the
commercial bank raises their lending rates, it results
in less borrowings and reduces money supply in the
economy

8. b) Open Market Operation
• It means the purchase and sale of securities
by central bank of the country.
• The sale of security by the central bank
leads to contraction of credit and purchase
there of to credit expansion.

9. c) Changing the Cash Reserve Ratio
• The banks have to keep certain amount of
cash reserves with the RBI as reserves –RBI
Act 1935
• CRR is a powerful weapon.
• An increase in the CRR would reduce the
available funds for bank credit and a
reduction would have the opposite effect.

10. d) Statutory Liquidity Ratio
• Every commercial bank is required to
maintain not less than 25% of its total time
and demand liabilities with RBI.
• It must be in the form of cash, gold,
unencumbered approved securities.
• Effect of SLR & CRR is same.

11. 2) Selective Credit Control
• They are adopted to divert the flow of credit
from speculative and unproductive activities
to productive and more urgent activities.
• The Power given by -“Sec 22 of Banking
Regulation Act 1949”.

12. Selective Controls includes-
a) Issuing of directives.
b) Regulation of margin requirements.
c) Differential rate of interest.
d) Restriction on clean advances.
e) Credit authorization scheme.
f) Moral suasion.
g) Direct action.

13. THANKS
sudhi89@gmail.com