credit management and monetary policy of rbi
TRANSCRIPT
Monetary Policy and Credit
Management of the RBI
Presented To: Ms.Megha.Kamat
Canara College
Mangalore
Presented By: Shailaja
Canara College
Mangalore
The RBI has been constructed as an apex authority for monetary management.
Its primary function is to formulate and administer monetary policy. Monetary
policy refers to “ the use of instruments with in the control of the Central bank to
influence the aggregate demand for goods and services by regulation of the
money and supply and credit”
Introduction
Methods of Credit Control
Bank Rate
Repo Rate
Open Market Operations
Variation in the Cash Reserve Ratio
Selective Credit Control
Moral Suasion
Evaluation of RBI’S Credit Control Policy
The RBI used bank rate, open market operations and variable cash reserve ratios as
instruments of monetary control in India. There are selective methods of credit control as
well. The bank has followed the monetary policy in such a way that credit needs are met for
production purposes, but credit facilities are restricted for speculative purposes.
There have been some other causes responsible to the limited effectiveness of RBI’S Credit
Control Policy. These are:
Availability of funds to banks from different sources, reducing their dependence on the
RBI.
Little coordination between monetary and fiscal policies.
Yields on government securities do not match with the money market conditions.
Existence of parallel economy.
Conclusion
Monetary policy cannot function effectively without a suitable
coordination with the fiscal policy. It is essential that both the polices
should move in tandem.
Bibliography
Seth.M.L. Money, Banking, International Trade and Public Finance. Laxmi Naran Agarwal