All About CRR,SLR and Refinance Facility [DIRECT INSTRUMENTS] of Monetary Policy Of RBI (in Hindi)

Lesson 2 of 6 • 48 upvotes • 10:19mins

Vikas Kumar Singh Tomar

Monetary policy is the Macroeconomic Policy laid down by the central bank of the country. It refers to the use of instruments under the control of the central bank to regulate the availability, cost and use of money and credit. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption and growth. In India, monetary policy of the Reserve Bank of India (RBI) is aimed at managing the quantity of money in order to meet the requirements of different sectors of the economy and to increase the pace of economic growth. The goals of Monetary Policy: Primarily price stability, while keeping in mind the objective of growth. In India, subsequent to the recommendations of the Dr. Urjit Patel Committee Report, the Reserve Bank has formally announced a “glide path” for disinflation that sets an objective of below 8 per cent CPI inflation by January 2015 and below 6 per cent CPI inflation by January 2016. The Reserve Bank’s Monetary Policy Department (MPD) assists the Governor in formulating the monetary policy. Instruments of Monetary Policy There are several direct and indirect instruments that are used in the implementation of monetary policy. Cash Reserve Ratio (CRR): The share of Net Demand and Time Liabilities (deposits) that banks must maintain as cash balance with the Reserve Bank. Statutory Liquidity Ratio (SLR): The share of Net Demand and Time Liabilities (deposits) that banks must maintain in safe and liquid assets, such as, government securities, cash and gold. Refinance facilities: Sector-specific refinance facilities aim at achieving sector specific objectives through provision of liquidity at a cost linked to the policy repo rate.