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Eco - Monetary Policy (Limitations (Unorganized Money market, Supply…
Eco - Monetary Policy
Limitations
Unorganized Money market
Supply constraints --> Monsoon
Less investment alternatives --> More deposit with banks
Less impact of policy on bank
Crude Oil, Gold import
Fiscal Deficit, Subsidy leakage, black money, underground economy
Why
Inflation Control
Dear money policy
Money Flow = bank to RBI
Direction to economy
Deflation control
Cheap money policy
Money Flow = RBI to bank
Introduction
NTDL
Time Liability
FD
RD
Demand Liability
CASA
Demand Draft
Circular money flow
Household
Land
labour
Capital
Intermediary
Banks
NBFI
Business
Rent
Wages
Interest
How
Qualitative
Margin/LTV
Concumer credit control/Down payment
Rationing
Moral Suasion
Direct Action
Quantitative
Reserve Ratios
CRR
meet immediate withdrawal obligation
Cash
4%
SLR
21%
Protect Depositors wealth
RBI Approved Sec
Gold
Cash
Open market operations
RBI Buy G-Sec
Inflation Increases
From GOI
From banks
RBI Sell G-Sec
Inflation Reduces
To GOI
To banks
Rates
bank Rate
7%
Long term loan from RBI --> banks
No Collateral
Not a main money control tool
Linked to Penalty rates for not maintaining CRR/SLR
Long term loan
LAF (Liquidity adjustment facility)
Short term Loan
Collateral - G Sec
Not from SLR
Types
Repo
6.5%
Min 5 Cr
All Clients eligible
Government
All banks
NBFI
Client Borrow From RBI
MSF
7%
Min 1 Cr
Only Schedule commercial bank
Over Night Funds
bank Borrow From RBI
Collateral - G Sec
RR
6%
RBi borrow from Client
Collateral G Sec
Solution
Urjit patel Committee