Skip to main content

Monetary Policy


Monetary policy entails measures taken by the Reserve Bank of India to influence aggregate demand in the economy. The monetary policy affects output and prices through its influence on key financial variables such as interest rates, exchange rates, asset prices, credit and monetary aggregates in the future. Monetary policy actions, therefore, are forward looking. The Reserve Bank uses various policy levers, such as repo rate, reverse repo rate, cash reserve ratio, statutory liquidity ratio and bank rate, to influence the amount of money in the market. An increase in any one of these could raise the interest rates.


• How do changes in interest rates affect monetary transmission?

By increasing or decreasing interest rates, thus raising or lowering the cost of holding cash for banks, RBI indicates that banks should increase or decrease rates for their customers. This change affects people's ability to borrow and lend money, thereby affecting overall demand and completing monetary transmission.


• How much time does it take for monetary policy to take effect?

The effect of monetary policy takes place after a lag and is also found to be variable. This depend on the state of the economy, amount of regulation, liberalisation and financial innovation in the economy. Research has shown that in India, monetary policy takes effect after a lag of 8-12 months. Also, experience has shown that tight liquidity conditions lead to faster transmission of monetary policy.


• How has RBI reacted in the recent past?

Inflation has been elevated for over a year and RBI has responded by raising the repo rate, or the rate at which it lends to banks, nine times. It has tried to bring down the aggregate demand. Lower demand acts as a check on rising prices.

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...
Read more

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...
Read more

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...
Read more

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Read more

ICICI Prudential Value Fund Series I

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Performance of the scheme will be benchmarked to the S&P BSE 500 index ICICI Prudential Value Fund is a closeended equity scheme. The scheme will have tenure of three years (1095 days) from the date of allotment of units. Units of the scheme will be fully redeemed at the end of the maturity period, unless rolled over. NFO PERIOD:   The NFO is open from October 18 to 28. The minimum subscription during the NFO period is Rs 5,000. SCHEME OBJECTIVE:   The scheme aims to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. INVESTMENT STRATEGY:     The fund proposes to invest in stocks that are trading at a huge discount in the BSE 500 index and plans to book profit and distribute dividen...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now