Impact of RBI?s Monetary Policy for the Last Two Decades and Medium Te :: essays research papers

We are obligated(predicate) to Prof.Bala V Balachandran, Prof.Lakshmi Kumar. The views expressed herein are those of the author and not ineluctably those of the Great Lakes Institute of Management. 2004 by Kaushik.P All rights reserved. Short sections of text, not to transcendtwo paragraphs, may be quoted with place explicit permission provided that full belief, including notice, is disposed(p) to the source."Impact of RBIs Monetary constitution for the Last two Decades and Medium Term St gaitgy for Managing Foreign Exchange Reserves."--Macro EconomicsKaushik.PSrinagar Colony, aside Raj Bhavan Road, 24, South Mada Street,Chennai - 600015, IndiaPreamble     The Monetary Policy, traditionally announced twice a year, regulates the translate of money and the cost and availability of credit in the economy. It deals with both the loaning and borrowing rates of interest for commercial banks. The Monetary Policy aims to maintain price stability, full e mployment and economic growth. The Reserve entrust of India is responsible for formulating and implementing Monetary Policy. It can increase or decrease the supply of currency as well as interest rate, carry out open merchandise operations, control credit and vary the reserve requirements. Objectives     The clinical of price stability has, however, gained further importance following the opening-up of the economy and the deregulating of financial securities industrys in India in recent times.There are quaternion main channels which the RBI looks at      Quantum channel money supply and credit (affects real output and price level through changes in militia money, money supply and credit aggregates).      Interest rate channel.      Exchange rate channel (linked to the currency).      As chastise price. Monetary PolicyPre-Reform (Prior 1992)In the pre-reform era, the financial m arket in India was extremely segmented and regulated. The money market lacked depth, with only the nightlong interbank market in place. The interest rates in the government securities market and the credit market were tightly regulated. The dispensation of credit to the Government took place via a statutory liquidity ratio (SLR) process whereby the commercial banks were made to set aside substantial portions of their liabilities for investment in government securities at infra market interest rates. Furthermore, credit to the commercial sector was regulated, with prescriptions of multiple lending rates and a prevalence of directed credit at highly subsidised interest rates. Monetary policy had to address itself to the task of neutralising the inflationary impact of the growing deficit. The Reserve Bank had to resort to direct instruments of fiscal control, in particular the cash reserve ratio.