Tag: instruments of monetary policy and the reserve bank of india

Dear money policy refers to a monetary policy by the central bank where the central bank sets high interest rates so that credit is not easily available to the general public in order to decrease the real income and hence purchasing power of the people. Such a policy is used by the government at the time of inflation in the economy. 

Cheap money policy refers to a monetary policy by the central bank where the central bank sets low interest rates so that credit is easily available to the general public in order to bring efficiency in trade and commerce in an economy. Such a policy is used by the government at the time of deflation or recession in the economy. 

Dear money policy refers to a monetary policy by the central bank where the central bank sets high interest rates so that credit is not easily available to the general public in order to decrease the real income and hence purchasing power of the people. Such a policy is used by the government at the time of inflation in the economy as it decreases the money supply in the economy which combats inflation. 

The Reserve Bank of India commenced operations on April 1, 1935, as a private shareholders bank before it was nationalized in 1949.

The central office of the RBI was initially established in Kolkata in 1935, but it was permanently moved to Mumbai in 1937.

The RBI serves as the Banker to the Government, managing its accounts and debt, and as the Banker's Bank, providing liquidity and oversight to commercial banks.

The RBI is the primary authority responsible for the management and control of foreign exchange in India under the Foreign Exchange Management Act (FEMA).

The Reserve Bank of India was established based on the recommendations of the Royal Commission on Indian Currency and Finance, also known as the Hilton Young Commission.

On January 1949, Reserve Bank of India(RBI) which is an apex bank that regulates and controls the entire banking system of India was nationalized. It is the sole agency of note issuing and controls the supply of money in the economy. It is also the government's bank and banker's bank as it acts an agent, guide and banker to government and the commercial banks. 

Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash. Cash reserve ratio is determined by central bank so that they can control the amount of credit creation of the commercial banks at the time of inflation or deflation in the economy. By the order of the parliament, Reserve Bank of India(RBI) can vary the cash reserve ratio between 3 to 15% of the total deposits of the commercial banks.