Monetory Policy

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  • Topic: Monetary policy, Inflation, Central bank
  • Pages : 15 (4039 words )
  • Download(s) : 23
  • Published : March 11, 2013
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“Impact of RBI Monetary Policy on Banks”

A PROJECT SUBMITTED
TO
Prof. Mishu Tripathi

Submitted By:

Roll No.Name

21Ambika Nadar
23 Nutan Panchal
25Satyam Pandya

Date of Submission: 7th Oct 2012

Management of Banks and Financial Services
MFM SEM – V (Batch-: 2010 - 2013)

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ACKNOWLEDGEMENT

As the saying goes, man is a social animal and whatever he has achieved today was not possible without the help of others. Every task he has carried out is the result of the symbiotic efforts of many known and unknown faces. That is why at the completion of my project I would like to bolster the fact above said and would like to thanks all those who have helped me knowingly and unknowingly.

We would like to express our sincere appreciation to Prof. Mishu Tripathi for her kind help, guidance, support and encouragement throughout our project. This project will help us to curve our personality in the best manner, which is needed for the professional career. In fact this project is the mirror of our aspiration.

Finally we would like to take this opportunity to thanks to our parent, other professors and friends who helped a lot in completion of this project successfully. CONTENT LIST

|Sr.No. |Topic |Page No | |1. |Introduction |04 | |2. |Research Methodology |11 | |3. |Monetary Measures and Tools |12 | |4. |Effectiveness of Monetary Policy in India |17 | |5. |Conclusion |19 | |6. |Bibliography |20 | 1. INTRODUCTION

1.1 WHAT IS MONETARY POLICY?

Monetary policy is the management of money supply and interest rates by central banks to influence prices and employment. Monetary policy works through expansion or contraction of investment and consumption expenditure.

Monetary policy is the process by which the government, central bank (RBI in India), or monetary authority of a country controls

i) the supply of money
ii) availability of money
iii) cost of money or rate of interest , in order to attain a set of objectives oriented towards the growth and stability of the economy. Monetary theory provides insight into how to craft optimal monetary policy.

Monetary policy is referred to as either being an expansionary policy, or a contractionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy involves raising interest rates in order to combat inflation. Monetary policy is contrasted with fiscal policy, which refers to government borrowing, spending and taxation

2. WHY IT IS NEEDED?

What monetary policy – at its best – can deliver is low and stable inflation, and thereby reduces the volatility of the business cycle. When inflationary pressures build up, it is monetary policy only which raises the short-term interest rate (the policy rate), which raises real rates across the economy and squeezes consumption and investment. The pain is not concentrated at a few points, as is the case with government interventions in...
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