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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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
Monetary Policy is defined by the Reserve Bank of India as “the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the RBI Act, 1934.” Monetary policy is concerned with the measures taken to regulate the supply of money, the cost and
The Monetary Policy Committee (MPC) is the body of the RBI, headed by the Governor, responsible for taking the important monetary policy decision about setting the repo rate. Repo rate is ‘the policy instrument’ in monetary policy that helps to realize the set inflation target by the RBI (at present 4%). The MPC replaces the
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