1. Role of Reserve Bank of India
(RBI)
Benjamen Arwade
PF1102
SIMSREE, Mumbai

2. Main functions of RBI
Main functions
Manager of Developmental
Bank of Issue Monetary authority Issuer of currency
exchange control role

3. Related functions
Cash Reserve
Bank Rate SLR
Ratio (CRR

4. • Bank of Issue : The Reserve Bank of India Act, the Bank has the
sole right to issue bank notes of all denominations.
• Monetary authority : It formulates, implements and monitors the
monetary policy as well as it has to ensure an adequate flow of credit to
productive sectors

5. • Manager of exchange control : To facilitate external trade and
payment and promote orderly development and maintenance of
foreign exchange market in India.
• Issuer of currency : The basic objectives of RBI are to issue bank
notes, to maintain the currency and credit system of the country to
utilize it in its best advantage, and to maintain the reserves
• Developmental role : The central bank had to perform a wide
range of promotional functions to support national objectives and
industries

6. What is Monetary Policy?
• Monetary policy is the process by which the monetary authority
of a country controls the supply of money
• Targeting the Rate of interest
• The purpose of which is economic growth & reduce the
unemployment.

7. Instruments of Monetary policy

8. Money supply
• The money stock, is the total amount of money
available in an economy at a specific time
• It is measures usually include currency in circulation
and demand deposits

9. Higher Economic Growth
• Economic growth is the increase in the amount of the goods and
services produced by an economy over time
• The concern about economic growth focuses on the desire to
improve a country's standard of living

10. Inflation
• Inflation is a rise in the general level of prices of
goods and services in an economy over a period
of time.

11. Price Stability
• Inflation increases price deflation decreases
• Inflation: Fixed income group face economic
problem. Problem in every sector of economy
• Deflation: It is a decrease in the general price of
level of goods and services

12. Types of Monetary Policy

13.
• Inflation targeting : Under this policy approach the target is to
keep inflation, under a particular definition such as Consumer Price
Index, within a desired range.
• Price level targeting : Price level targeting is similar to inflation
targeting except that CPI growth in one year over or under the long
term price level target is offset in subsequent years such that a targeted
price-level is reached over time

14. • Monetary aggregates : It is a tendency in economic
thought that emphasizes the role of governments in controlling the
amount of money in circulation.
• Fixed exchange rate : Under a system of fiat fixed rates,
the local government or monetary authority declares a fixed
exchange rate but does not actively buy or sell currency to maintain
the rate. Instead, the rate is enforced by non-convertibility
measures.

15. • Gold standard : The gold standard is a system
under which the price of the national currency is
measured in units of gold bars and is kept constant
by the government's promise to buy or sell gold at
a fixed price in terms of the base currency.

16.
Monetary policy tools

17. • Monetary base : Monetary policy can be implemented by
changing the size of the monetary base. Central bank use open
market operations to change the monetary base.
• Reserve requirements : Banks only maintain a small
portion of their assets as cash available for immediate withdrawal;
the rest is invested in illiquid assets like mortgages and loans

18. • Discount window lending : Discount window
lending is where the commercial banks, and other depository
institutions, are able to borrow reserves from the Central Bank at
a discount rate.
• Interest rates : The contraction of the monetary supply can be
achieved indirectly by increasing the nominal interest rates.

19. Thank You