Monetary policy is the process by which monetary authority of a country , generally central bank controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI). It is so designed as to maintain the price stability in the economy. Other objectives of the monetary policy of India, as stated by RBI, are:-
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Monetary operations
Monetary operations involve monetary techniques which operate on monetary magnitudes such as money supply, interest rates and availability of credit aimed to maintain Price Stability, Stable exchange rate, Healthy Balance of Payment, Financial stability, Economic growth. RBI, the apex institute of India which monitors and regulates the monetary policy of the country stabilizes the price by controlling Inflation. RBI takes into account the following monetary policies:
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Instruments of Monetary policy
These instruments are used to control the money flow in the economy,stated following;
Key Indicators
As of 8 April 2017, the key indicators are
RBI MONETARY POLICY COMMITTEE
Recently RBI signed an agreement with central government called Monetary policy framework convention on 20 Feb,2015 that puts responsibility on rbi to target maximum tolerable inflation (cpi) to achieve price stability. For the above framework rbi introduced a finance bill in Indian budget fy 2016-17 to cover statutory baking. Recently government formed rbi policy committee viz Monetary policy committee (MPC) with six members group similar to USA fomc with 12 members. In this 3 members from RBI and three expert members will be nominated by government. So RBI governor absolute veto is no more there with this committee but when ever there is tie i.e 3:3, Then governor can use extra vote to brake tie. Present committee targeted inflation rate is 4 percent with mean deviation of 2 percent so it stands between 2 to 6 percent.
Source of the article : Wikipedia
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