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Apna Sapna Money-Money. RBI. Monetary Policy and Industrial Policy. By- Rahul Jain. Monetary Policy.

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Apna sapna money money
ApnaSapna Money-Money

Monetary policy
Monetary Policy

The term "monetary policy" refers to the actions undertaken by a central bank, such as the RBI, to influence the availability and cost of money and credit to help promote national economic goals.

Tools of monetary policy
Tools of monetary policy

  • Thus the three ways in which the federal reserve can change the money supply are 1. Change in Bank Rate 2. Open Market operations like buying and purchasing of government securities 3. Change in Cash reserve ratio and SLR

Slr requirements

  • Banks, NBFCs, and HFIs are required to invest in government securities and other approved debt instruments and securities to comply with the SLR requirements of the RBI.

  • The SLR, which is the minimum level of investment in approved securities, computed daily, is a percentage of the outstanding net demand and time liabilities (NDTL) of banks.

  • For NBFCs and HFIs, SLR is a percentage of their outstanding public deposits.

Increase in money supply
Increase in Money Supply

1. Reduction in bank rate,  specific interest rate on loans and savings 2. Buying  of government securities from bank to increase the money supply 3. Reduction in the variable reserve ratios like statutory liquidity ratio and cash reserve ratio.

(Mishra & Puri)

Reduction in money supply
Reduction in Money Supply

1. Rise in bank rate, specific interest rate on loans and savings

2. Selling of government securities to bank to curb inflation and to contract the money supply

3. Increase in the variable reserve ratios like statutory liquidity ratio and cash reserve ratio.


In economics, inflation is an increase in the general level of prices of a given kind. General inflation is referred to as a rise in the general level of prices.

Measuring inflation
Measuring Inflation

Use of price index system for measuring inflation. For example, The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services

Causes of inflation
Causes of Inflation

  • Cost Push

  • Demand Led

Costs of inflation
Costs of Inflation

  • It leads to uncertainty about the value of money

  • It can lead to recession

  • It can hurt the productivity

Fear of inflation
Fear of Inflation

  • Can destabilize the economy

  • Can lead to reduction in Purchasing Power

Rbi establishment


The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.

The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.

Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.


"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

Central board
Central Board

  • The Reserve Bank's affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.

  • Appointed/nominated for a period of four years

  • Constitution:

    • Official Directors

      • Full-time : Governor and not more than four Deputy Governors

Central board1
Central Board

  • Non-Official Directors

    • Nominated by Government: ten Directors from various fields and one government Official

    • Others: four Directors - one each from four local boards

  • Functions : General superintendence and direction of the Bank's affairs

  • Local boards
    Local Boards

    • One each for the four regions of the country in Mumbai, Calcutta, Chennai and New Delhi


    • consist of five members each

    • appointed by the Central Government

    • for a term of four years

    • Functions : To advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time.

    Main objectives
    Main objectives

    1. Monetary authority

    • Formulates, implements and monitors the Monetary Policy, announced twice a year.

    • Announces the Credit Policy, announced twice a year - in April it announces new policy initiatives, the October pronouncement is a review of the April policy.

    • Objective: Maintaining price stability and ensuring adequate flow of credit to productive sectors.

    • Maintain optimum Liquidity in the economy.

    India s industrial policy
    India’s Industrial Policy

    The Indian government has removed bureaucratic controls on industry, under its liberalization policy. However, licensing and restrictions still exist in the following sectors:

    • Two sectors reserved for public sector viz., Atomic Energy and Railways

    • Five Industries in which licensing is compulsory –

    • Distillation and brewing of alcoholic drinks

    • Cigars and cigarettes of tobacco

    • Electronic Aerospace and Defence equipment

    • Industrial explosives

    • Hazardous chemicals

    Foreign investment in india
    Foreign Investment in India

    Foreign Direct Investment (“FDI”)

    Opportunities exist for investing in India in sectors as diverse as tourism and infrastructure, petrochemicals and mining technology and engineering, real estate, biotechnology, bio-informatics and nanotechnology. India is also being seen as the global destination for R&D, engineering design and prototype development and a manufacturing hub for high technology products.

    Fdi policy
    FDI Policy

    According to the current policy, FDI is not permitted in the following sectors –

    Certain sectors, namely:

    • Atomic energy;

    • Lottery business/gambling and betting;

    • Agriculture (excluding floriculture, horticulture, seed development, animal husbandry, pisciculture and cultivation of vegetables, mushrooms, etc.)

    • Plantations (excluding tea plantation)

    • Retail Trading (other than single brand retail)

    Investment by foreign institutional investors fii
    Investment by Foreign Institutional Investors (“FII”)

    • An FII must be registered with SEBI and must comply with certain investment limits. They may purchase shares and/or convertible debentures of an Indian company under the Portfolio Investment Scheme.

    • The shares/convertible debentures of an Indian company must be purchased through registered brokers on recognized stock exchanges in India.

    • FII’s are also permitted to purchase shares/convertible debentures of an Indian company through private placement/arrangement.

    • Foreign pension funds, mutual funds, investment trusts, asset management companies, nominee companies and incorporated/institutional portfolio managers or their power of attorney holders may invest In India as FIIs.


    • www.bls.gov

    • Mishra & Puri , MACRO ECONOMICS. Sultan Chand & Sons

    • www.americanchronicle.com/articles/viewArticle.asp

    • www.economics.about.com

    • www.investopedia.com

    • www.en.wikipedia.org