02-02-2013, 01:04 PM
Money Supply in India
Money Supply.ppt (Size: 128.5 KB / Downloads: 57)
INTRODUCTION
Monetary policy refer to steps taken by RBI to
regulate cost and supply of money in order to
achieve certain socio Economic objective like
price stabilization full employment, exchange
regulation and increased economic growth
The growth in money supply must be higher then the growth in the real national Income This stems for two reasons
As income grows ,the demand for money as one of the component of saving tends to increase
An increase in money supply is also necessitated by gradual reduction of the non-mentioned sector of the economy.
In our country, the rate of increase in money supply has been far excess of the rate of growth in real national income
Money Market
MM is “ Centre for dealings, mainly of a short term character, in monetary assets; it meets the short term requirement of the borrowers and provides liquidity or cash to the lenders. It is a place where short term surplus investible funds at the disposal of the financial and other institution and individual are bid by borrowers, again comprising institutions and individual and also by government
Function of Money Market
It provides various kind of credit instrument to augment the money supply
It helps to minimise the gluts and stringencies in money market due to seasonal variations in the flow of and demand of funds
It helps in quick transfer of funds
Operation in Money Market
Call (overnight) money
Notice money
Commercial Bills
Treasury Bills
Certificate of Deposit
Commercial Paper
Call/Notice Money
All categories of bank and financial institution are allowed to participate in call/notice market. The fund are lent for one day or from Saturday to Monday or for a period up to 14 days. Both the borrower and lender have current account with the RBI. It is also used by banks to maintain CRR/SLR level to avoid punitive measure by the RBI