Are R.B.I Policies Suitable For Click to edit Master subtitle style Growth Of Indian Economy?

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WELCOME Y.SINDHURA DEEPIKA M.GOPI KRISHNA M.SANDEEP K.S.R.M ENGINEERING COLLEGE KADAPA.
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Reserve Bank Of India

The Central Bank Of India -RBI. Rs. 5 crores on the basis

Established In 1935 With a Share Capital Of

of the Hilton Young Commission.

Capital was Divided into Rs. 100 each fully paid up which was entirely owned by private shareholders in the beginning.
RBI

The Share

was nationalised in 1949. of normal value of Rs. 2,20000.

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The govt. held shares

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Monetary Policy

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What is Monetary Policy?

Shaw

defines monetary policy as any conscious action undertaken by the monetary authorities to change the quantity, availability or cost.., of money. Monetary policy is essentially a programme of action undertaken by the monetary authorities generally the central bank, to control and regulate the supply of money with the public and the flow of credit with a view to achieving the objectives of general economic policy
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Objectives Of Monetary Policy

Maintain Flow

price Stability.

of credit to the productive sectors of the economy. for the national currency.

Stability Growth To

in employment and income.

promote and encourage economic growth in the country.

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INSTRUMENTS OF MONETARY POLICY

SLR

Bank rate

Open market operations

QUANTITATIVE

Cash Reserve Ratio

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Bank Rate policy

Traditional

approach:- Bank rate means on which central bank discounts and rediscount the eligible bills. approach:- Bank rate means the minimum rate on which central bank provides financial accommodation to commercial bank in the discharge of its function as the lender of the 5/5/12 last resort. Present rate is 6%.

Todays

 Decrease in Increase in bank

Effect of

bank rate rate charge by charge by bank the centralthe central bank on on its advance its advance to to commercial commercial bank. bank. Commercial bank increase Commercial bank decrease the rate of the rate of interest on their interest on their loan. Bank rate loan. Demand for the 5/5/12 credits and loan Demand for the

YEAR

GROWTH DURING THE LAST FISCAL

Chart Title

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FOOD INFLATION

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Open Market operation

Its include the sales and purchase by the central bank of .
Assets Foreign Gold Government Company

exchange securities

securities
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 Central In the

bank increase the decreasethe depressionary inflationary money supply. situation bank purchase the sale out the securities to from the commercial commercial bank. bank and control money supply.

Central

Use of Open Market operation

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Cash Reserve Ratio

Commercial

bank has to keep a certain percentage of his deposits with central bank. control economy. the cash flow in

It

It keeps changes in monetary policy framed by central bank of 5/5/12 a country. Presently it is 6%.

STATUARY LIQUIDITY RATIO

Commercial

bank is to keep a certain percentage of his deposit as liquid asset. control economy. the cash flow in

It

It keeps changes in monetary policy framed by central bank of 5/5/12 a country. At present it is 24%.

o Increased the Decreased the In Inflationary Depressionary

percentage of situation cash reserve ratio and Statutory liquidity ratio liquidity ratio o It reduces the increases the supplyof money supply of in an economy money in an economy

Use of C.R.R. & S.L.R

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Qualitative Instruments
v

Credit Rationing: Under this two measures are adopted: Imposition of upper limits on the credit available to large industries and firms. Charging a higher interest rate on bank loans beyond a certain limit.

Change In Lending Margins: The banks provide loans only upto a certain percentage of the value of the mortgaged property. The gap between the value of the mortgaged property 5/5/12 and amount advanced is called lending margin.

v Moral Suasion:

The moral suasion is a method of persuading and convincing the commercial banks to advance credit in accordance with the directive of the central bank in the economic interest of the country.

Direct controls: Where all other methods prove ineffective, the monetary, authorities resort to direct control measures with clear directive to the banks carry 5/5/12 out their lending activity in a specified manner.

Highlights of Monetary Policy 2011-2012

The

Reserve Bank announces the following policy measures: The Bank Rate has been retained at 6.0 percent. It has been decided to increase the repo rate from 8.25 per cent to 8.50 per cent The reverse repo rate is increased from 7.25 per cent to 7.50 per cent. It has been decided to increase the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 5.75 per cent to 6.0 per cent. The SLR is announced 24%. 5/5/12

v v v v

Limitations Of Monetary Policy

v

The time lag : The first and the most important limitation in the effective working of monetary policy is the time lag. i.e. time taken in chalking out the policy action, its implementation and working time. Problem in forecasting : The formulation of an appropriate monetary policy requires a reliable assessment of the magnitude of the problem-recession or inflation- as it helps in determining the appropriate policy measures.
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Non-banking Financial Intermediaries: The structural change in the financial market has also reduced the scope of effectiveness of monetary policy. Under Development of money and capital markets : The effectiveness of monetary policy in less developed countries is reduced considerably because of the underdeveloped character of their

capital and money markets.

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CONCLUSION
Economy

is expected to develop at 8.2 percent in 2011-12. grew at 6.6 percent in 2010-11. Likely to nurture at 3.0 percent in 2011-12. grew at 7.9 percent in 2010-11. Likely to nurture at 7.1 percent in 2011-12. grew at 9.4 percent in 5/5/12 2009-10. Likely to nurture at

Agriculture

Industry

Services

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