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Current Monetary Policy in India

- Ankit Singh Click to edit Master subtitle style Saini 11203 -

Prashant Andhale 11202 -Aniket Khaire 11223 -Akshay Bhave 11260


Monetary Policy
It is the process by which the central bank

or the monetary authority of a country controls: supply of money availability of money and rate of interest

1. 2. 3.

to attain growth and stability of economy.


Types Of Monetary Policies

Expansionar y v/s Contractiona ry Accommodat ive v/s Tight Neutral


Instruments of Monetary Policy

Cash Reserve Ratio(CRR) Repo Rate Reverse Repo Rate Statutory Liquidity Ratio (SLR) Bank Rate Savings Rate (Now Deregulated)

Current Rates
Cash Reserve Ratio(CRR) Repo Rate Reverse Repo Rate
24 % 4.75 % 8% 7%

Statutory Liquidity Ratio (SLR) Bank Rate



Changes in Repo & Reverse Repo Rate

*2007 onwards.


Changes in CRR from 2007 onwards


after 2001` Slowdown / dotcom bubble

Changes in CRR from 2007 onwards Rise in CRR to control Boost Economy
liquidity, due to Heavy Capital CRR Cuts to Inflow & boost to curb Re economy Appreciation after 2009 Slowdown

Stable CRR from 2004 to

CRR hikes to 10/13/12 curb

Policy rate Changes & Inflation rate

*Economic Survey 2011-12


Monetary Policy Effects


Money Supply Inflatio n

Repo Rate

Market Condition Stabilizing Economy


Bank Rate

Current Economic Scenario in India

Reduction in Inflation Slowdown in Economic Growth (6.9 %)

Sharp Decline in Industrial Growth (3.6 %)

Increasing Fiscal Deficit (5.9 % of GDP)

Negative Sentiments of FIIs (Decline in 10/13/12


Expected Measures
Clearance of Policy Decisions like GAAR, GST

Further ease in Bank Rate

Stabilization of Rupee v/s Dollar

Sustained control on Inflation

Single policy rate to signal the stance of

Monetary Policy


Monetary Policy Channels

Interest Rate Channel

Debt Market Channel

Fiscal Responsibility and Budget Management

Developing of Corporate Debt Market

Foreign Exchange Channel

Communication Channel
Role of RBI Governor


Miscommunication by RBI
* by Cristado & Veronese On 9th May 2011, the RBI Governor said:

Monetary Policy, as is well known, is an infective instrument for reining in inflation emanating from supply pressures. It is unrealistic, under these circumstances, to expect the Reserve Bank to deliver on an inflation target in the short-term...we have a problem about which inflation index to target."

Thank You !