Reserve Bank of India

Prof. Mahesh Haridas, Christ University, Bangalore

1/23/2012

y Established in April 1935 with a share capital of Rs. 5

crores y Nationalised in the year 1949

Prof. Mahesh Haridas, Christ University, Bangalore

1/23/2012

Functions of Reserve Bank of India

y Bank of Issue y Banker to Government y Bankers' Bank and Lender of the Last Resort y Controller of Credit y Foreign Exchange management and control y Developmental functions y Promotional functions

Prof. Mahesh Haridas, Christ University, Bangalore

1/23/2012

Monetary Policy
y It is the policy statement, traditionally announced

twice a year, through which the Reserve Bank of India seeks to ensure price stability for the economy y It covers money supply, interest rates and the inflation. y RBI also announces norms for the banking and financial sector and the institutions which are governed by it

Prof. Mahesh Haridas, Christ University, Bangalore

1/23/2012

y The Monetary Policy regulates the supply of money y y y y

and the cost and availability of credit in the economy It deals with both the lending and borrowing rates of interest for commercial banks. It aims to maintain price stability, full employment and economic growth RBI is responsible for formulating and implementing Monetary Policy. It can increase or decrease the supply of currency as well as interest rate
1/23/2012

Prof. Mahesh Haridas, Christ University, Bangalore

Difference between monetary policy and fiscal policy

y Fiscal Policy is a broader tool with the government. y It can be used to overcome recession and control y

y y y

inflation It may be defined as a deliberate change in government revenue and expenditure to influence the level of national output and prices. At the time of recession the government can increase expenditures or cut taxes in order to generate demand Govt can reduce its expenditures or raise taxes during inflationary times. It aims at changing aggregate demand by suitable changes in government spending and taxes.

Prof. Mahesh Haridas, Christ University, Bangalore

1/23/2012