CENTRAL BANK & MONETARY POLICY

Indias financial sector is diversifying and expanding rapidly. It comprises of commercial banks,
insurance companies, non-banking financial companies, cooperatives, pension funds, mutual
funds and other smaller financial entities. India has a bank dominated financial sector and
commercial banks account for over 60 per cent of the total assets of the financial system
followed by the Insurance. The financial markets are characterized by various degrees of
imperfections which explain the need for regulating the market. The financial system deals with
peoples money and therefore, their confidence, trust and faith in it is crucially important for its
smooth functioning. Financial regulation is necessary to generate, maintain and promote this
trust. The players in a financial system like the savers, investors or the intermediaries may take
imprudent risk which could lead to defaults, bankruptcies and insolvencies. When this happens at
a large scale, the entire system and the economy is shaken. Therefore, regulation is needed to
check imprudence in the system. Regulations are needed to ensure that the investors are
protected; that disclosure and access to information are adequate, timely and equal; that the
participants follow the rules of the market; and that the markets are both fair and efficient.
At present, financial regulation in India is oriented towards product regulation, i.e. each product
is separately regulated. For example,
Fixed deposits and other banking products are regulated by the RBI
Mutual funds and equity markets by the Securities and Exchange Board of India
Insurance by the Insurance Regulatory Development Authority of India (IRDA)
The New Pension Scheme (NPS) by the Pension Fund Regulatory and Development
Authority (PFRDA), and
The forward markets by the Forward Market Commission (FMC) under the supervision
of the Ministry of Finance, Government of India.
All these regulators have a key mandate to protect the interests of customers - they may be
investors, policy holders or pension fund subscribers, depending on the product. However, the
central bank of India, RBI plays the most important role alongside SEBI. The organization and
functions of RBI are discussed here.
The RBI was established on April 1, 1935 in accordance with the provisions of the Reserve Bank
of India Act 1934. The Central Office of the RBI was initially established in Kolkata but was
permanently moved to Mumbai in 1937. Though originally privately owned, in 1949 the RBI
was nationalized and since then fully owned by the Government of India.
The Preamble of the RBI describes the basic functions of the RBI as 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.

The Reserve Banks affairs are governed by a Central Board of directors whose main function is
general supervision and direction of the banks affairs. The board is constituted with
Official directors: governor and not more than four deputy governors, and
Non-official directors: ten directors from various fields and two government officials and
four directors one each from four local boards
Local boards are constituted with the functions to advise the Central Board on local matters and
to represent territorial and economic interests of the local cooperative and indigenous banks.
They are also supposed to perform such other functions as delegated by the Central Board from
time to time. There are four local boards for the four regions of the country: Mumbai, Chennai,
Kolkata and Delhi; each consists of five members appointed by the central government for a
term of four years.
Functions of RBI
The main functions of RBI are,
i)
To maintain monetary stability monetary stability broadly refers to stable prices and
confidence in the currency
ii)
To maintain financial stability and ensure sound financial institutions financial
stability is a state where financial markets and institutions are resistant to economic
shocks and fit to perform their functions smoothly
iii)
To maintain stable payment systems - payment and settlement systems play an
important role in improving overall economic efficiency. They consist of all the
diverse arrangements that we use to systematically transfer money-currency, paper
instruments such as cheques, and various electronic channels.
iv)
To promote the development of financial infrastructure in terms of markets and
systems
v)
To ensure credit allocation according to national economic priorities and social
concerns
vi)
To regulate overall volume of money and credit in the economy.
Roles of RBI
Based on the functions it performs, the roles that RBI plays can be broadly described as
i)
Note issuing authority the RBI since its inception has the sole authority to issue
currency notes other than the one rupee note/coin and coins of smaller denominations.
However, all the currencies are put into circulation through RBI only. All affairs
related to currency management are conducted through its Issue Department.
ii)
Governments banker Since its inception, the Reserve Bank of India has undertaken
the traditional central banking function of managing the governments banking
transactions. The Reserve Bank of India Act, 1934 requires the Central Government
to entrust the Reserve Bank with all its money, remittance, exchange and banking
transactions in India and the management of its public debt. The Government also

deposits its cash balances with the Reserve Bank. The Reserve Bank may also, by
agreement, act as the banker and debt manager to State Governments. Currently, the
Reserve Bank acts as banker to all the State Governments in India (including Union
Territory of Puducherry), except Sikkim. For Sikkim, it has limited agreement for
management of its public debt. RBI in its capacity as the banker to the central and
state governments provide all banking services such as acceptance of deposits,
withdrawal of funds, making payments, receiving payments, managements of public
debt and so on. It charges a commission only for debt management where the main
idea is to raise resources from the market at a minimum cost in accordance with
monetary policy objective. The RBI issues Ways and Means Advances (WAMAs) as
temporary loans for a maximum maturity of three months. The WMA scheme for the
State Governments has provision for Special Drawing Facility (SDF) and Normal
WMA. The SDF is extended against the collateral of the government securities held
by the State Government. After the SDF limit is exhausted, the State Government is
provided a normal WMA. The normal WMA limits are based on three-year average
of actual revenue and capital expenditure of the state. The withdrawal beyond the
WMA limit is considered an overdraft. A State Government account can be in
overdraft for a maximum 14 consecutive working days with a limit of 36 days in a
quarter. The management of providing the overdraft facility is a major responsibility
of the RBI. The interest charged on overdrafts are very high. The rate of interest on
WMA is linked to the Repo Rate. Surplus balances of State Governments are invested
in Government of India 14-day Intermediate Treasury Bills automatically in
accordance with the instructions.
Under the administrative arrangements, the Central Government is required to
maintain a minimum cash balance with the Reserve Bank. Currently, this amount is
Rs.10 crore on a daily basis and Rs.100 crore on Fridays, as also at the annual
account closing day of the Centre and the Reserve Bank (end of March and June).
Under a scheme introduced in 1976, every ministry and department of the Central
Government has been allotted a specific public sector bank for handling its
transactions. Hence, the Reserve Bank does not handle governments day-to-day
transactions as before, except where it has been nominated as banker to a particular
ministry or department. As banker to the Government, the Reserve Bank works out
the overall funds position and sends daily advice showing the balances in its books,
Ways and Means Advances granted to the government and investments made from
the surplus fund. The daily advices are followed up with monthly statements.
iii)

Bankers bank Like individual consumers, businesses and organisation of all kinds,
banks need their own mechanism to transfer funds and settle inter-bank transactionsuch as borrowing from and lending to other banks-and customer transactions. As the
banker to banks, the Reserve Bank fulfills this role. Banks are required to maintain a

iv)

v)

vi)

vii)

portion of their demand and time liabilities as cash reserves with the Reserve Bank.
For this purpose, they need to maintain accounts with the Reserve Bank. They also
need to keep accounts with the Reserve Bank for settling inter-bank obligations, such
as, clearing transactions of individual bank customers who have their accounts with
different banks or clearing money market transactions between two banks, buying and
selling securities and foreign currencies. RBI controls the volume of banks reserves
and their ability to create credits. It also acts as the lender of the last resort. It can
come to the rescue of a bank that is solvent but faces temporary liquidity problems by
supplying it with much needed liquidity when no one else is willing to extend credit
to that bank. The Reserve Bank extends this facility to protect the interest of the
depositors of the bank and to prevent possible failure of the bank, which in turn may
also affect other banks and institutions and can have an adverse impact on financial
stability and thus on the economy.
Supervising authority RBI provides the broad parameters within which the banks
and the financial system function in India. This include 1) issue of licenses for new
banks/bank branches; 2) prescription of minimum requirements of reserves, liquid
assets etc. 3) inspection of the working of the banks in terms of their organizational
set up, branch expansion, deposit mobilization, investment and credit portfolio
management, region-wise performances, profit planning, man power planning and
training and so on; 4) conduct of ad hoc investigations from time to time of
complaints,
irregularities
and
frauds;
5)
to
control
appointment/reappointment/termination of appointment of chairman/CEOs of private
banks; and 6) to approve/force amalgamations/reconstruction/liquidation of banks.
Exchange control authority RBI has the responsibility of developing and regulating
the foreign exchange market. It is the custodian of Indias foreign currency reserves.
It has the authority to enter to into foreign exchange transactions on its own account
as well on behalf of the government.
Promoter of the financial system in this role the RBI has done a commendable job
by diversifying the institutional structure of the Indian financial system. For instance
IDBI, IFCI, SFCs, IIBI, Exim Bank, SIDBI, NABARD etc were created with
concessional financial support which were later phased out for most of them.
Regulator of money and credit RBI formulates and conducts monetary policies.
Monetary policy refers to the use of the techniques of monetary control to achieve the
broad objectives of i) maintaining price stability and ii) ensuring adequate flow of
credit to productive sectors. The important tools of monetary control are, a) open
market operations (OMO), b) bank rate, c) cash reserve ratio (CRR), d) statutory
liquidity ratio (SLR), e) liquidity adjustment facility (LAF), and f) repo rates. These
instruments are discussed below.

Tools of Monetary Control

Open Market Operations
OMOs refer to the sale and purchase of securities of the central and state governments and Tbills by the RBI. The major objectives are i) to control money supply through banks reserves,
and ii) to support the governments borrowing programme. In India OMOs are conducted only
through central govt. securities and often are not used as a monetary policy tool. RBI mostly
buys securities on switching operations where long term securities are exchanged for short term
securities. It is primarily used as a debt management tool. Nevertheless, increase in the net sales
of govt. securities through OMOs has helped in regulating credit flows in the banking sector.
Bank Rate
Bank rate is the rate at which the RBI buys commercial papers and makes advances on specified
collaterals to banks. An increase (decrease) in the bank rate would lead to an increase (decrease)
in the lending rate by the banks and hence, a decrease (increase) in the volume of credit. Prior to
1997, bank rate was not frequently used as an effectively monetary policy tool. Post 1997 it has
been reactivated and now it acts as a signal for banks to revise their loan prices.
Cash Reserve Ratio (CRR)
RBI prescribes the CRR as a percentage of demand and time liabilities of banks. Default in
maintenance of CRR is liable to penal interest on the amount of shortfall.
Statutory Liquidity Ratio
SLR is the ratio of cash in hand (excluding CRR), balances in current account with banks and
RBI, gold and approved securities (mostly govt. securities) to the total demand and time
liabilities (DTL) of the bank. Alternatively, SLR refers to mandatory investment in gold and
government securities as a percentage of their total DTL or the liquid assets that banks have to
hold as a percentage of their total DTL. The objectives of SLR are i) to restrict expansion of
bank credit, ii) to augment banks investments in government securities and iii) to ensure
solvency of banks. The SLR defaults result in restrictions on the access of refinance from RBI,
higher costs of refinance and penal interest payment in excess of ban rate on the shortfall
amount. An increase in the SLR does not restrain total expenditure in the economy. Rather, it
favours public sector expenditure at the cost of private sector expenditure. The converse is true
for a decrease in SLR.
Repo Rates
Repo is a useful money market instrument enabling the smooth adjustment of short term liquidity
among banks and financial institutions. Repo refers to a transaction in which a participant
acquires immediate funds by selling securities and agrees to repurchase the same after a specified
time at a specified price. Thus, it is a short term collateralized borrowing/lending through
exchange of debt instruments. The maturity period of repos ranges from 1 to 14 days. In reverse
repo one party buys securities from another party for additional income from idle cash. Since

repos are securitized, they are safer than call/notice money. They are used by central banks as
instruments of monetary control. Repo implies injection of liquidity and reverse repo implies
absorption of liquidity.
Currently two types of repos are in operation market repos and RBI repos. Market repos are
repo transactions among banks and primary dealers in eligible govt. securities. RBI repos are the
mechanism through which RBI lends money to banks against govt. securities. Alternatively,
when banks need money they can borrow from the RBI at the repo rate and they can park their
extra funds with the RBI at reverse repo rate. Repo rates are of two types: overnight repo refers
to repos with maturity period of one day and when maturity is more than one day it is called term
repo. When the RBI wants to ease the liquidity situation, it may lower the repo rate.
Liquidity Adjustment Facility (LAF)
The RBI uses an array of facilities to relieve liquidity shortages in the economy. For instance,
RBIs export credit refinance (ECR) facility was extended to scheduled commercial banks on the
basis of their eligible outstanding rupee credit both at the pre-shipment and post-shipment stages.
However, these facilities have been gradually phased out and LAF was introduced on June 5,
2000 as a tool of day to day liquidity management through injection or absorption of liquidity
through purchase or sale of securities. It operates through repo and reverse repo. Repo/reverse
repo auctions are conducted on a daily basis except on Saturdays and Sundays with a tenor of
one day except on Friday and days preceding holidays. Repo and reverse repo rates are decided
through cut off rates emerging from auctions conducted by the RBI on a multiple price auction
basis. The RBI has the option of introducing long term repos of up to 14 days and to switch over
to fixed rate repos on an overnight basis as and when required. Scheduled commercial banks and
primary dealers holding accounts with RBI are eligible to use the LAF.
RBI introduced Marginal Standing Facility (MSF) for liquidity adjustment with effect from May
9, 2011, where eligible scheduled commercial banks can avail overnight loan up to one percent
of their NDTL (excluding SLR) by pledging all SLR-eligible securities. The minimum amount of
credit should be Rs 1 crore and in multiple of Rs 1 crore thereafter. Repo rates are 100 basis
points higher than reverse repo rates and MSF rates are 100 basis points higher than the repo
rates.
Aside: 1 basis point equals 1/100 or 0.01 percent. Similarly 1 percent is 100 basis points.
The Money Supply Process and Money Multiplier
There are three players in the money supply process: namely, the central bank, the banks
(depository institutions) and the depositors, i.e. the individuals and institutions that hold deposits
with the banks. The central bank is the most important entity in the money supply process. Its
conduct of monetary policy affects its balance sheet which consists of its holdings of assets and
liabilities. Consider a simplified balance sheet as follows:

The Central Bank Balance Sheet

Assets
Securities
Loans to financial institutions

Liabilities
Currency in circulation
Reserves

The asset side must equal the liabilities side. The two liabilities in the balance sheet are
important part of the money supply process because change in either or both will lead to a
change in the money supply in the economy (everything else being constant). In most countries
they form the monetary base or base money or reserve money. Table 1 below defines the
monetary aggregates in the Indian context followed by definitions of various components
included therein. Reserves or Bankers deposits with the RBI in India consist of required
reserves as dictated by the central bank through CRR and excess reserve, which is any amount of
reserves that the banks hold in excess of their reserve requirement with the central bank.
Assets are also important in the money supply process, since changes in assets lead to changes in
reserves and hence, changes in the money supply. Additionally, assets earn much higher interest
income than liabilities (reserves). Securities include primarily govt. securities which the central
banks sell or purchase from the banks to control liquidity in the economy through changes in the
reserves. On the other hand, the banks and other financial institutions can take loans from the
central bank known as borrowed reserves. These loans appear as liabilities in the financial
institutions balance sheets. An increase in loans increases money supply. Thus, the central bank
can exercise control over the monetary base through various monetary policy tools discussed
above.
Now let us consider OMO as a tool to bring changes in liquidity position. If the central bank
goes for open market sale, say of Rs 100 million, then its assets increase by additional securities
worth Rs 100 million while its reserves increases by Rs 100 million. On the other hand, for the
commercial banks as a whole only the asset side of the balance sheet will change. There will be
Rs 100 million in securities and + Rs 100 million in reserves. If say Rs 50 million is loaned out
then reserves decrease by Rs 50 million while on the asset side itself loans are added worth Rs 50
million.
With increase in their reserves banks create deposits through loans and advances. A chain of
deposit creation follows every time a cheque is issued to the creditor (in a simplistic framework).
Alternatively, if the banks purchase securities then also the process will be similar starting with
writing cheques for the seller of securities. Thus, one can obtain a simple deposit multiplier as
1

= where rr is the CRR, D is total demand deposits and R is total reserves = required
reserves (assuming that banks do not hold excess reserves).

Change in Banking Systems Balance Sheet

Assets
Liabilities
Securities (-Rs 100 million)
Reserves (+ Rs 100 million)
Or
Assets
Securities (-Rs 100 million)
Reserves (+ Rs 50 million)
Loans & Advances (+Rs 50 million)

Liabilities

Let us take a simple example to show how this happens. Assume that a bank receives an addition
of Rs 1000 in his reserves. If the CRR is 0.10, then the bank loans out Rs 900 after keeping aside
10 percent as required reserve. In this process of lending the amount the bank creates a loan
account of the creditor. The creditor while spending the money draws a check in the name of the
receiver which the receiver deposits in a bank and the bank creates an account in the name of the
depositor. However, the bank in the second stage further loans out this increase in reserve by
setting aside 10 percent as required reserves. Thus, in the second stage the loan amount is Rs
810. This process continues. The amounts of deposits created are shown in the following table.
This shows that the total amount of deposit creation (which forms creation of money or money
supply) is 10 times the original increase in the reserves (approximately) as suggested by the
simple deposit multiplier, 1/rr, discussed above. Therefore, the concept of money multiplier tells
us how much the money supply changes with a change in the monetary base. Since the money
multiplier is large than one, one percent increase in monetary base leads to manifold increase in
the money supply. That is why monetary base is also referred to as high-powered money.
CRR
100
90
81
72.9
65.61
59.05
53.14
47.83
43.05

Loan
amount CRR
1000
38.74
900
34.87
810
31.38
729
28.24
656.1
25.42
590.49
22.88
531.44
20.59
478.3
18.53
430.47
16.68
387.42
15.01

Loan
amount CRR
348.68
13.51
313.81
12.16
282.43
10.94
254.19
9.85
228.77
8.86
205.89
7.98
185.3
7.18
166.77
6.46
150.09
5.81
135.08
5.23

Loan
amount CRR
121.57
4.71
109.41
4.24
98.47
3.82
88.62
3.43
79.76
3.09
71.78
2.78
64.6
2.5
58.14
2.25
52.33
2.03
47.1
1.83

Loan
Loan
amount CRR
amount
42.39
1.64
14.78
38.15
1.48
13.3
34.33
1.33
11.97
30.9
1.2
10.77
27.81
1.08
9.69
25.03
0.97
8.72
22.53
0.87
7.85
0.79
7.06
20.28
0.71
6.35
18.25
9942.59
16.42

However, the problem with the above multiplier is that in reality every transaction does not lead
to creation of demand deposits. The loaned amount can be completely spend by drawing cash or
partly in terms of checks, partly in cash. Therefore, a more realistic money multiplier will be

usually less than 1/rr and can be derived using the following formulae. Required reserves, excess
reserves, and currency in circulation, all can be expressed as certain percentage of checkable
deposits.
RR = r D
ER = e D
C=cD
MB = RR + ER + C = (r D) + (e D) + (c D) = (r + e + c) D
D = MB / (r + e + c)
Where RR = required reserve; ER = excess reserve; D = checkable deposits; r = CRR (in India);
e = ratio of excess reserve to demand deposits; C = currency in circulation; c = ratio of currency
to checkable deposits; and, MB = monetary base.
Now, consider the narrow or M1 definition of money (defined in Table 1) where
M = C + D = (c D) + D = (1 + c) D
1+

M = ++ MB
1+

1+

Here ++ is the money multiplier denoted by m. If e = 0, the multiplier reduces to + , the most
commonly used one. Since, both r and c are fractions, the denominator is smaller than the
numerator and hence, the multiplier is larger than one.

Reserve
Money (M0)

M1
M2
M3

M4
NM1
NM2
NM3

Table 1. Monetary Aggregates

=Currency in circulation + Bankers deposits with the RBI + Other deposits
with the RBI
= Net RBI credit to the government + RBI credit to the commercial sector, +
RBIs claims on banks + RBIs net foreign assets + govt.s currency liabilities to
the public RBIs net non-monetary liabilities
=Currency with the public + demand deposits with the banking system + Other
deposits with the RBI
=M1 + savings deposits of post office savings banks
=M1 + time deposits with the banking system
=net bank credit to the govt. + bank credit to the commercial sector + net foreign
exchange assets of the banking sector + govts currency liabilities to the public
net non-monetary liabilities of the banking sector
=M3 + all deposits with post office savings banks (excluding National Savings
Certificates)
=Currency with the public + demand deposits with the banking system + Other
deposits with the RBI
= NM1 + short-term time deposits of residents (including and up to the
contractual maturity of one year)
= NM2 + long term time deposits of residents + call/term funding from financial
institutions.

Currency in circulation includes notes in circulation, rupee coins and small coins.
Currency with the public is arrived at after deducting cash with banks from total currency in
circulation.
Bankers deposits with the Reserve Bank represent balances maintained by banks in the
current account with the Reserve Bank mainly for maintaining Cash Reserve Ratio (CRR) and as
working funds for clearing adjustments.
Other Deposits with the Reserve Bank include deposits from foreign central banks,
multilateral institutions, financial institutions and sundry deposits net of IMF Account No. 1.
(The IMF conducts its financial dealings with a member through the fiscal agency and the
depository designated by the member. In addition, each member is required to designate its
central bank as a depository for the IMFs holding of the members currency, or if it has no
central bank, a monetary agency or a commercial bank acceptable to IMF. Most members have
designated their central banks as both the depository as well as the financial agency. The
depository maintains without any service charge or commission, two accounts that are used to
record the IMFs holdings of the members currency the IMFs account no. 1 and IMFs account
no. 2 The no. 1 account is used for IMF transactions, including subscription payments, purchases
and repurchases and repayment of resources borrowed by IMF.)
Net Reserve Bank credit to Government includes the Reserve Banks credit to Central
as well as State Governments.
The Reserve Banks credit to the commercial sector represents investments in
bonds/shares of financial institutions, loans to them and holdings of internal bills purchased and
discounted.
The Reserve Banks claims on banks include loans to the banks including NABARD. In
case of the new monetary aggregates, the RBIs refinance to the NABARD, which was earlier
part of RBIs claims on banks, has been classified as part of RBI credit to commercial sector.
The Reserve Banks net foreign assets are its holdings of foreign currency assets and
gold.
Governments currency liabilities to the public comprise rupee coins and small coins.
Other liabilities of the Reserve Bank include internal reserves and provisions of the
Reserve Bank such as Exchange Equalisation Account (EEA), Currency and Gold Revaluation
Account (CGRA), Contingency Reserve and Asset Development Reserve. Gains/losses on
valuation of foreign currency assets and gold due to movements in the exchange rates and/or
prices of gold are not taken to Profit and Loss Account but instead booked under a balance sheet
head named as CGRA. The balance represents accumulated net gain on valuation of foreign
currency assets and gold. CGRA was earlier known as Exchange Fluctuation Reserve (EFR).
The balance in EEA represents provision made for exchange losses arising out of forward
commitments. Contingency Reserve represents the amount set aside on a year-to-year basis for
meeting unexpected and unforeseen contingencies including depreciation in value of securities,
exchange guarantees and risks arising out of monetary/ exchange rate policy compulsions. In

order to meet the internal capital expenditure and make investments in subsidiaries and associate
institutions, a further specified sum is provided and credited to the Asset Development Reserve.
Net non-monetary liabilities (NNML) of the Reserve Bank are liabilities which do not
have any monetary impact. These comprise items such as the Reserve Banks paid-up capital and
reserves, contribution to National Funds, RBI employees PF and superannuation funds, bills
payable, compulsory deposits with the RBI, RBIs profit held temporarily under other deposits,
amount held in state Governments Loan Accounts under other deposits, IMF quota subscription
and other payments and other liabilities of RBI less net other assets of the RBI.
Currency with the public is currency in circulation less cash held by banks. Demand
deposits include all liabilities which are payable on demand and they include current deposits,
demand liabilities portion of savings bank deposits, margins held against letters of
credit/guarantees, balances in overdue fixed deposits, cash certificates and cumulative/ recurring
deposits, outstanding Telegraphic Transfers (TTs), Mail Transfers (MTs), Demand Drafts (DDs),
unclaimed deposits, credit balances in the Cash Credit account and deposits held as security for
advances which are payable on demand.
Time deposits are those which are payable otherwise than on demand and they include
fixed deposits, cash certificates, cumulative and recurring deposits, time liabilities portion of
savings bank deposits, staff security deposits, margin money held against letters of credit if not
payable on demand, India Millennium Deposits and Gold Deposits.
Net bank credit to Government comprise the RBIs net credit to Central and State
Governments and commercial and co-operative banks investments in Central and State
Government securities.
Bank credit to commercial sector include RBIs and other banks credit to commercial
sector. Other banks credit to commercial sector includes banks loans and advances to the
commercial sector (including scheduled commercial banks food credit) and banks investments
in other approved securities.
The acronyms NM1, NM2 and NM3 are used to distinguish the new monetary aggregates
[as proposed by the Working Group on Money Supply: Analytics and Methodology of
Compilation (WGMS) (Chairman: Dr. Y.V. Reddy), June 1998] from the existing monetary
aggregates.