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Monetary Policy

What is monetary Policy?

Monetary policy is the process by which the monetary authority of a country controls the supply of money and interest rates in order to maintain price stability and achieve high economic growth rate and to stabilize inflation.

Objectives of Monetary Policy:

  • To control inflation.
  • Controlled expansion of bank credit.
  • Desired distribution of credit
  • Maintain control over finacial system
  • Promotion of exports.

Operations of Monetary Policy:

  1. CRR, SLR, Bank Rate , Repo Rate, Reverse Repo Rate are managed by monetory authority.
  2. Open market operations such as buying and selling of govt. securities.
  3. Credit Ceiling: RBI issues prior information to the commercial banks to give loans upto certain limit.