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MONETARY POLICY
The term monetary policy refers to actions taken by central banks to affect monetary magnitudes or other financial conditions. Monetary policy is an instrument which effect the credit flow in an economy. The variation effect the demand & supply of credit in an economy, and the level or nature of economic activities.
Objective
Stability in price level Economic development Arrangement of full employment Expansion of credit facility Equality & Justice Stability in exchange rate
INSTRUMENTS
GENERAL (QUANTITATIVE) Methods SELECTIVE (QUALITATIVE) Methods
Types
Bank rate policy Open market policy Cash reserve ratio Statuary reserve ratio
Central bank decrease the money supply. Central bank sale out the securities to commercial bank and control money supply.
Central bank increase the money supply. Central bank purchase the securities from the commercial bank.
Reduce the bank rate Purchase of securities Reduce the C.R.R. Reduce the S.L.R.
Increase the bank rate sales of securities Increase the C.R.R. Increase the S.L.R.
Current Rates
Saving bank Bank Rate CRR 4.00% 6.0% 6.0 %
SLR
Repo Rate
24.0%
8.25%
Reverse Repo Rate 7.25% PLR Deposit rate 12% 15% 8.50% 9.50%
http://www.rbi.org.in
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