It is an occasionally used monetary policy, which is adopted by the government to increase money supply in the economy in order to further increase lending by commercial banks and spending by consumers. The central bank infuses a pre-determined quantity of money into the economy by buying financial assets from commercial banks and private entities. […]
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The RBI has come up with yet another esoteric concept. Standing Deposit Facility, proposed by the RBI and under examination by the Centre, is viewed as a strong tool to suck out the surplus liquidity and alleviate the banking system’s problem of plenty. This concept, first recommended by the Urjit Patel committee report in 2014.
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MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities. This came into effect in May 2011. Under the Marginal Standing Facility (MSF), currently banks avail funds from the RBI on overnight basis below the stipulated SLR up to 2.5% of their respective
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Reserve Ratio Reserve ratio (RR) is the proportion of the total deposits commercial banks keep as reserves. Banks hold a part of the money people keep in their bank deposits as reserve money and loan out the rest to various investment projects. Reserve money consists of two things – vault cash in banks and deposits
The Reserve Bank of India is the central bank of the country. Central banks are a relatively recent innovation and most central banks, as we know them today, were established around the early twentieth century.The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission. The Reserve
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The Producer Price Index (PPI) is a weighted index of prices measured at the wholesale, or producer level. The PPI shows trends within the wholesale, manufacturing industries and commodities markets. All of the physical goods-producing industries that make up the economy are included, but imports are not. The PPI measures the average changes over time
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WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. WPI in India is published by the Office of Economic Adviser, Ministry of Commerce and Industry. An, important point to take note of is the wholesale price index (WPI) does not includes the
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A type of persistent inflation caused by deficiencies in certain conditions in the economy such as a backward agricultural sector that is unable to respond to people’s increased demand for food, inefficient distribution and storage facilities leading to artificial shortages of goods, and production of some goods controlled by some people. It is prevalent in
Structural Inflation Read More »
Demand-pull inflation Demand pull inflation is caused by increased demand in the economy, without adequate increase in supply of output. It is mainly an outcome of excess money income with the people. This high money income would be due to increased money supply. The situation of “too much money chasing too few goods” is an instance of
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