Monetary policy of RBI

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PRESENTATION ON

MONETARY POLICY

Presented By : Chetan Jadav

Rasik Jani

CD DeshmukhThe First Indian Governor ofReserve Bank of India (RBI)

Dr. Raghuram RajanPresent Governer ofReserve Bank of India (RBI)

Monetary policy- MeaningThe part of the economic policy which regulates the

level of money in the economy in order to achieve

certain objectives.

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

∫ Economic Growth

∫ Full Employment

∫ Flow of credit in all sectors of economy

∫ Price Stability

∫ Exchange rate stability

OBJECTIVES

ELEMENTS OF MONETARY

POLICY

Qualitative Measures

Quantitative Measures

Repo Rate LOAN TAKER = BANK

Reverse Repo Rate

LOAN TAKER = RBI

Quantitative measures

ALWAYS REPO IS HIGHER THAN REVE. REPO.

Bank rateOpen market

operations

Cash reserve ratio (CRR)

Statutory liquidity ratio (SLR)

Quantitative measures

Quantitative measures

Bank rate :

Bank Rate is the rate at which central bank of the country (in India it is RBI) allows finance to commercial banks. Bank Rate is a tool, which central bank uses for short-term purposes.

Open market operations

Quantitative measures

An open market operation (also known as OMO) is an activity by a central bank to buy or sell government bonds on the open market.

Cash reserve ratio (CRR)

Quantitative measures

This serves two purposes. It ensures

that a portion of bank deposits is totally risk-free.

It enables that RBI control liquidity in the system, and thereby,

inflation by tying their hands in lending money

Always stands between 3 % to 15

%

Ω Moral SuasionΩ Direct ActionΩ Regulation in consumer credit

Qualitative Measures

REGULATION IN CONSUMER CREDIT

Qualitative Measures

most of the consumer durables like T.V., Refrigerator, Motorcar, etc. are available on installment basis.

If there is excess demand for certain consumer durables leading to their high prices, central bank can reduce consumer credit by (a) increasing down payment, and (b) reducing the number of installments of repayment of such credit.

DIRECT ACTION

Qualitative Measures

This method is adopted when a commercial bank does not co-operate the central bank in achieving its desirable objectives.

MORAL SUASION

Qualitative Measures

To arrest inflationary situation central bank persuades and request the commercial banks to refrain from giving loans for speculative and non-essential purposes.

On the other hand, to counteract deflation central bank pursuades the commercial banks to extend credit for different purposes.

IF :Bank Rate

Bank Rate

CRR/SLR

CRR/SLR

•2.9%

Inflation

•9.50%

Bank Rate

•4.75%

CRR•2

4%

SLR

•8.50%

Repo Rate

•7.50%

Reverse Repo Rate

•11.5 to 12%

PLR

•51.27%

Re/$

Current Rates

CASE STUDY

CORRECTIVE STEPS TAKEN TO STABILIZE EXCHANGE RATE ( RS ).

Use Indian product.

Avoid meeting in five star hotel.

Avoid foreign tour.

Come out idol money balance in market .