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Money is any object or record that is generally accepted as payment for goods and services and repayment of debts

in a given socio-economic context or country. Money is a financial asset that serves three functions in the real economy. o Serves as a medium of exchange o Serves as an unit of account o Serves as a store of value

Reserve money , Broad money and Narrow are the composition of Money Supply. MONEY SUPPLY The total stock of money circulating in an economy is the money supply. The circulating money involves the currency, printed notes, money in the deposit accounts and in the form of other liquid assets. Money supply plays a crucial role in the determination of price level and interest rates.Growth of money supply helps in acceleration of Economic development and price stability

NARROW MONEY Money held for immediate current spending or Transaction process. BROAD MONEY It is a measure of the money supply that includes more than just physical money. Money held for transaction purposes and money held in the form of savings or store of value.

In the 13th century, paper money became known in Europe through the accounts of travelers, such as Marco Polo and William of Rubruck.Marco Polo's account of paper money during the Yuan Dynasty is the subject of a chapter of his book, The Travels of Marco Polo, titled "How the Great Kaan Causeth the Bark of Trees, Made into Something Like Paper, to Pass for Money All Over his Country. In medieval Italy and Flanders, because of the insecurity and impracticality of transporting large sums of money over long distances, money traders started using promissory notes. In the beginning these were personally registered, but they soon became a written order to pay the amount to whoever had it in their possession. These notes can be seen as a predecessor to regular banknotes.The first European banknotes were issued by Stockholms Banco, a predecessor of the Bank of Sweden, in 1661.These replaced the copper-plates being used instead as a means of payment,although in 1664 the bank ran out of coins to redeem notes and ceased operating in the same year.

Inspired by the success of the London goldsmiths, some of which became the forerunners of great English banks, banks began issuing paper notes quite properly termed banknotes which circulated in the same way that government issued currency circulates today. In England this practice continued up to 1694. Scottish banks continued issuing notes until 1850. In USA, this practice continued through the 19th Century, where at one time there were more than 5000 different types of bank notes issued by various commercial banks in America. These banknotes were a form of representative money which could be converted into gold or silver by application at the bank. Since banks issued notes far in excess of the gold and silver they kept on deposit, sudden loss of public confidence in a bank could precipitate mass redemption of banknotes and result in bankruptcy. The Bank of England was granted sole rights to issue banknotes in England after 1694. In the USA, the Federal Reserve Bank was granted similar rights after its establishment in 1913. Until recently, these government-authorized currencies were forms of representative money, since they were partially backed by gold or silver and were theoretically convertible into gold or silver

Money is a good that acts as a medium of exchange in transactions. Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange. Quantity of money- Money quantity is the nominal value of particularly "liquid" financial instruments in an economy. "Liquidity" means that an asset is easy to sell in any moment with small or no losses in respect to nominal price.

Cash Bank Deposit

function of cash. Consumers spend cash to fulfill their primary (basic) needs like food, clothing, shelter, education, etc. They also spend cash to satisfy their ancillary needs such as entertainment, buying luxurious goods, tourism, so on. Entrepreneurs accumulate cash in the form of profits earned by providing goods and services to consumers. They use this profit for the expansion of business. Some amount of this profit is then distributed among investors and is also used for maintaining reserves to meet contingencies. Employees or workers get a return for their work in form of salaries (wages), short-term benefits and allowances like medical and travelling allowance, and long-term benefits such as provident fund, gratuity, pension and so on. The function of a cash is a continuous and never-ending process.

Bank Deposit Meaning: In deposit terminology, the term Bank Deposit refers to an amount of money in cash or check form or sent via a wire transfer that is placed into a bank account. The target bank account for the Bank Deposit can be any kind of account that accepts deposits. Bank Deposit Example: For example, a Bank Deposit is generally made when opening an account or in the course of routine business or personal transactions that involve placing funds with the bank for future use. Bank deposits can be made in a number of different ways. The most direct way is to walk into a bank or a bank branch in which you hold an account. You are then usually required to fill in a Bank Deposit slip with the particulars of your account and the amount of money you wish to deposit. In addition, Bank Deposits can be made via wire transfer, as well as through a direct deposit plan from employers in many cases.

Three types of bank deposits for investors

Savings accounts Cash management/savings maximiser accounts Term deposits

Increasing Investment Security Diversification of investment plans Facility of lockers

o o o o o o


M (M-zero) is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency. This measure is known as narrow money because it is the smallest measure of the money supply. M - Reserve Money

M as a definition of a countrys money supply focuses on money's role as an exchange medium. A customer paying for groceries can use coins, paper currency or write a check. All of these payment methods are part of M. Demand deposits and checking accounts have become increasingly popular as an exchange medium with the advent of ATMs and debit cards. M=Currency with public + Demand deposits with the Banking system + Other deposits with RBI

M is a broader money classification than M, because it includes assets that are highly liquid but not cash. A consumer or business typically wont use savings deposits and other non-M components of M when making purchases or paying bills, but it could convert them to cash in relatively short order. M=M and Saving Deposits with post office.

M is a broadest measure of money. M emphasizes money as a store-of-value more than money as a medium of exchange. It is more closely related to the finances of larger financial institutions and corporations than to those of businesses and individuals. M= M and time deposits of all commercial and corporative banks M= Reserve money * Money Multiplier

a) b) c) d)

M= M and total deposits with post office saving organisations. M = M+ Building soceity deposit RBI tries to control reserve money by Forex reserves Government borrowings Loan by RBI to banks Currency in supply

Introduction Broad money is a measure of money supply that includes less liquid assets like term deposit or demand deposit with bank and other activities. The most common used measure of broad money is M3. It includes currency and coins and deposit in current account, saving account and small time deposit at commercial banks and non institutional money market account.

The four main monetary aggregates of measures of money supply which reflects the state of the monetary sector are: M1(narrow money)= currency with public + demand deposit of public. M2= M1+post office saving deposit. M3(broad money)= M1+time deposit of public with bank M4= M3+ other deposit.

India money supply M3

Development in total turnover:

Total turnover in money-market lending has decreased by 37 per cent since 2007, to a daily average of kr. 56 billion The most remarkable fall is seen for lending, which has dropped by 47 per cent. The higher counterparty and liquidity risks resulting from the crisis have thus led the banks to transfer much of their moneymarket trading to the collateralised market.DEVELOPMENT IN


Interest-rate formation in the money market is the basis for interest rates in the rest of the financial system. Interest rates in the money market reflect current and expected monetary-policy interest rates, but also depend on the specific COMPONENTS OF MONEY SUPPLY product and maturity.
April 2009June 2009 July 09 Sep 09
13.6 11.6

Oct 09 Dec 09

Jan 10Mar 10

As on Apr 9, 2010

Currency with Public


13.9 11.3


Demand 11.4 deposits with bank OTHER DEPOSITS with RBI Time 0.2

14.0 12.0











1) The Co existence of organised and un organised sectors: Its a peculiar feature of Indian market is that co existence of organised and un organised sectors. The organised sector consists of Reserve Bank of India, SBI and its affiliates, Commercial banks, The RBI supervises these banks. Indigenous banks bankers and other belong to un organised sector and this sector is not coming under the purview of RBI. 2) Lack of Integration: Indian market is divided into several segments. The various segments of Indian market is not well connected. Its leads to unhealthy competition among the segments.

3) High Volatile Money market: The important feature of Indian market is the seasonal stringency of funds. The money rates fluctuates 4) Diversified Money rates: Funds cannot move from one section to another, money rates of interest differ. 5)Absence of well organised bill market: The market for government and semi government securities is not popular. 6) Limited availability of credit resources: Indian money market does not have adequate short term credit instruments.

8) Few Lenders: The Lenders in market are few and borrowers are large in number. 9) Shortage of Capital: Market is facing the problem of capital shortage. Hence it cannot meet the requirements of trade and commerce.

Polymer currency- The Reserve Bank of India (RBI) will execute a union government's mandate to introduce plastic/polymer currency note of Rs 10 on a field trial basis in five cities in India. Depending on the success of the move and how these notes work, the RBI will then decide on the next denomination of such notes that have to be brought out Rs 10 polymer banknotes in five cities - Simla, Kochi, Jaipur, Bhubhaneshwar and Mysore.

Electronic form of money

Soon- consumers will no longer need to carry paper, coins or plastic to make their purchases! With the upcoming launch of Google Wallet and ClearXChange, consumers will be able to use their handy smartphones when theyre on the go to pay for their purchases

Bit coins-Bitcoin is a peer-to-peer payment network and digital currency based on an open source protocol, which makes use of a public transaction log

It is called a cryptocurrency because it uses public-key

When paying with bitcoin, no actual exchange takes place between buyer and seller. Instead, the buyer requests an update to a public transaction log, the blockchain. This master list of all transactions shows who owns what bitcoins currently and in the past

Foreign exchange rate- there is also some chances of change in foreign exchange rate.

India Rupee per U.S. Dollar Currency Exchange Forecast Indian Rupee per One United States Dollar. Average of Month. Mont h 0 1 2 3 4

Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr

50% 80% Forecast Correc Correct Value t +/+/62.52 61.2 61.5 60.3 59.9 0.0 0.4 0.6 0.7 0.8 0.0 0.9 1.3 1.6 1.8




The indian economy is vastly affected by the money supply and money market. Money supply effects the economy on three sides. control the inflation in an economy growth of an economy interest rates From barter sytem to silver/gold coins to present paper currency,impact of money has been same throughout and the future is certainly uncertain.