Monetary policy - Central Banking, Indian Financial system Video Lecture | Indian Financial System - B Com

[Music]
one of the major functions of RBI is to
control inflation and liquidity in the
economy today I am going to discuss
about various tools with RBI that
directly impact some money supply in the
economy the first tool is cash reserve
ratio CRR is a certain percentage of
total bank deposits that has to be
captain the current account with our
here this is the money that commercial
banks need to keep the area the impact
of increased CR positive impact it is a
quick fix to control inflation by
increasing CRR commercial banks need to
deposit more money with RBI thus
commercial banks left with less money
now loans become dearer so people have
less money as less money with commercial
banks leads to less money with people it
leads to lower demand for goods and
services which ultimately leads to lower
prices simply highe CRR sucks some money
from the economy the impact of decreased
CR on more money with commercial banks
leads to more money with people which
leads to higher demand for goods and
services which leads to higher prices
CRR should be aligned with supply and
production levels if people are
producing more then they deserve to
spend degrees ciara provides a
short-term fix as an increases demand
for short-term
statutory liquidity ratio or SLR this is
the percentage of liabilities and time
deposits that commercial bank
need to keep with them in form of cash
would a government approved securities
impact of increase in SLR commercial
banks need to keep more liquid funds
which leads to less loans to people
which leads to lower demand for goods
and services which leads to lower prices
impact of decreasing esalaam commercial
banks need to keep less liquid funds
which leads to more loans to general
people which leads to higher demand for
goods and services and which ultimately
leads to higher prices the next tool is
reproof and reverse repo rates reported
it is the rate at which RBI lent money
to commercial banks against securities
commercial banks go to RBI or the
central bank whenever there is a
shortage of front the reverse referent
reverse repo rate is a short term boring
rate at which our play borrows money
from commercial banks once I'm back if
commercial banks get more money then
they will lend more money to people
which will lead to more demand and the
economy thus prices will increase the
next tool is bank rate it is a rate at
which our pay lends money to commercial
banks without any security impact but as
I unpack of bank rate when bank rate is
increased interest rate also increases
which have negative impact on demand
thus prices increases the next to the
very important pool
is marginal standing funny buzzers
mechanism commercial banks can get two
loans from RBI for the emergency needs
commercial banks can take loan only up
to 1 percent of their liabilities and
time deposits open market operations
open market operations refers to the
buying and selling of government
securities in the open market in order
to expand or contract the amount of
money and the banking system time backed
up to choosing the securities more money
in the economy leads to more demand
which ultimately leads to higher growth
rate the impact of selling of government
securities it leads to less money in the
economy which leads to less demand of
goods and services which ultimately
leads to lower prices in the economy so
that that's all for today I hope you
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