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Monetary Policy: Presented By: Abhishek Jain Bankedge Ludhiana

The document discusses various aspects of monetary policy in India. It explains that monetary policy is used by the Reserve Bank of India to regulate money supply and credit in the economy in order to achieve objectives like low and stable inflation and economic growth. Some of the key monetary policy tools discussed include cash reserve ratio, statutory liquidity ratio, repo rate, reverse repo rate, bank rate, marginal standing facility, liquidity adjustment facility, and open market operations. The overall goal of monetary policy is to maintain price stability and ensure adequate credit flow to support growth while maintaining financial stability.

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45 views12 pages

Monetary Policy: Presented By: Abhishek Jain Bankedge Ludhiana

The document discusses various aspects of monetary policy in India. It explains that monetary policy is used by the Reserve Bank of India to regulate money supply and credit in the economy in order to achieve objectives like low and stable inflation and economic growth. Some of the key monetary policy tools discussed include cash reserve ratio, statutory liquidity ratio, repo rate, reverse repo rate, bank rate, marginal standing facility, liquidity adjustment facility, and open market operations. The overall goal of monetary policy is to maintain price stability and ensure adequate credit flow to support growth while maintaining financial stability.

Uploaded by

JOHN
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We take content rights seriously. If you suspect this is your content, claim it here.
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MONETARY POLICY

Presented By:
Abhishek Jain
Bankedge Ludhiana
MONETARY POLICY

• It refers to the use of instruments under the control of the central bank
to regulate the availability, cost, and use of money and credit.
• It is made by RBI under Monetary policy committee.
• The Goal of monetary policy is to achieve specific economic objectives
such as low and stable inflation and promoting growth.
• It is a Bi-Monthly policy.
OBJECTIVES

• Maintaining Price stability


• Maintaining Financial stability
• Ensuring adequate flow of credit to the productive sectors of the
economy to support economic growth
Direct Indirect
Repo Rate
Cash Reserve Ratio
Reverse Repo Rate
Statutory Liquidity Bank Rate
Ratio Marginal Standing
Facility
Refinance Facility Liquidity Adjustment
Facility
Open Market
Operation
CASH RESERVE RATIO

• The cash reserve ratio is the percentage of total NDTL which


commercial banks are required to maintain in the form of cash reserve
with the central bank.
• It is calculated and maintained on daily basis.
• It is mandatory under section 42(1) of the RBI Act, 1934.
• RBI does not pay any interest on the amount deposited by banks under
CRR.
• Current rate of CRR is 4%
STATUTORY LIQUIDITY RATIO

• It is share of NDTL that banks must maintain in safe and liquid assets
such as government secs, cash and gold.
• There is prescribed amount in SLR that banks must invest in
Government securities.
• Following are the assets which a bank has to maintain with themselves
under SLR:
a) Cash
b) Gold valued at price not exceeding market price
c) Investments only in SLR securities

• Current rate of SLR is 19.5%


REFINANCE FACILITY

RBI

• Money Banks

• Money Customers
REPO RATE
• It is the rate at which bank borrows money from RBI for short term i.e.
90 days.
• There is an agreement where bank promises to repurchase the
securities from RBI after expiration of period for the borrowing.
• Minimum amount to be borrowed is Rs 5 crores and maximum can be
0.5% of NDTL.
• These are used vastly to increase or decrease flow of credit in the
economy.
• Current Policy repo rate is 6.25%.
BANK RATE

• It is the rate at which RBI buys or rediscount bills of exchange or other


commercial papers.
• It also signals the medium term stance of monetary policy.
• Banks are charged at this rate of interest after the borrowing from
central bank goes beyond 90 days.
• Current Bank Rate is 6.50%.
MARGINAL STANDING FACILITY

• It was introduced in the year 2011 by G. Mahalingam.


• SCB can borrow overnight through the window against approved
government securities.
• Minimum Amount is Rs 1 crore and Maximum can be 2% of their NDTL.
• Interest charged on these type of borrowings is 100 basis points above
Repo rate.
• Only those banks are able to borrow who has SGL a/c with RBI
LIQUIDITY ADJUSTMENT FACILITY
• It consists of daily infusion or absorption on a repurchase basis through
repo and reverse repo auction operations.
• Minimum amount is Rs 5 crores and in multiples of same.

OPEN MARKET OPERATIONS


• It is the outright sale or purchase of government securities in open
markets.
• It is done to maintain level of liquidity in the economy.
THANK YOU

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