1.
HOW WOULD A STRINGENT MONETARY POLICY
IMPACT INVESTMENT DECISIONS ? How is it
useful for a retail banker ?
Batch Code : HYD01AA0213
Faculty: Vishwanathan Ramakrishnan
Date : 30 October 2013
NAME
ID NUMBER
BHAVANA
E130031000126
AJITH
E130031000142
HIMAJA
E130031000134

2.
S.No
Description
1
Introduction To Monetary Policy
2
Stringent Monetary Policy
3
Characteristics
4
Objective
5
Types of Monetary Policy
6
Factors Affecting Monetary Policy
7
Instruments
8
Impact on Investment Decision
9
Current Monetary Policy
10
Investments Options
11
Inferences

3.
 Monetary policy is the process by which
the monetary authority of a country
controls the supply of money
 It is release twice an year
Slack season policy
April - September
Busy Season policy
October- March

4.
 Stringent Monetary policy means low liquidity
in the markets which basically means interest
rates are relatively higher

5.





Key changes in Bank Rate
Rise in OMO
Increase in SLR
Increase in CRR
Increase In RBI & bank lending policies

6.
 Maintaining price stability
 Infusion of adequate Credit to productive sectors.
 Full employment
 Balance of payments equilibrium
 Neutrality of money
 Equal income distribution

7.
Inflation targeting: Objective is to keep inflation under
control, such as Consumer Price Index, within a desired
range
Price level targeting : Is similar to inflation targeting .
It actually takes past years into account.
Monetary aggregates : To mainly control the amount of
money in circulation.

8.
Fixed exchange rate : The government declares a fixed
exchange rate but does not actively buy or sell currency
to maintain the rate .
Gold standard : Price of the national currency is
measured in units of gold bars.
 It is kept constant by buying or selling gold at a fixed
price in terms of the base currency

9.
• Money not appealing in the Economy
• Existence of Unorganized Financial Market

10.









Bank Rate
Statutory Liquidity Ratio
Open Market Operations
Cash Reserve Ratio
Repurchase Auction Rate(Repo) and Reverse
Repurchase Auction Rate (Reverse Repo)
Margin Requirement
Credit Ceiling
Direct Action
Moral Persuasion

11.
Impact on Investment Decisions
On Economy
o When Restrictive
o When Accommodative

12.
 Accommodative Monetary Policy:
Cash is not king, as investors prefer to deploy
their money anywhere rather than parking it in
deposits that provide minimal returns
 Restrictive Monetary Policy:
Cash tends to do well here, since higher
deposit rates induce consumers to save rather
than spend

13.
• Key changes in Interest rates will affect the
Lending policy.

14.
(per cent)
1
2
Repo Rate
Marginal
Standing
Facility@
Cash
Reserve
Ratio*
Statutory
Liquidity
Ratio*
3
Effective since
Reverse Repo
Rate
4
5
6
May 03, 2011
6.25 (+0.50)
7.25 (+0.50)
8.25 (+0.50)
6.00
24
June 16, 2011
6.50 (+0.25)
7.50 (+0.25)
8.50 (+0.25)
6.00
24
July 26, 2011
7.00 (+0.50)
8.00 (+0.50)
9.00 (+0.50)
6.00
24
September 16, 2011
7.25 (+0.25)
8.25 (+0.25)
9.25 (+0.25)
6.00
24
October 25, 2011
7.50 (+0.25)
8.50 (+0.25)
9.50 (+0.25)
6.00
24
January 28, 2012
7.50
8.50
9.50
5.50 (-0.50)
24
March 10, 2012
7.50
8.50
9.50
4.75 (-0.75)
24
August 11, 2012
7.00
8.00
9.00
4.75
23 (-1.00)
September 22, 2012
7.00
8.00
9.00
4.50 (-0.25)
23
6.75 (-0.25)
7.75 (-0.25)
8.75 (-0.25)
4.25
23
6.75
7.75
8.75
4.00 (-0.25)
23
6.50 (-0.25)
6.25 (-0.25)
7.50 (-0.25)
7.25 (-0.25)
8.50 (-0.25)
8.25 (-0.25)
4.00
4.00
23
23
July 15, 2013
6.25
7.25
10.25 (+2.00)
4.00
23
0ct 29,2013
6.75
7.75
8.75
4.00
23
January 29, 2013
February 09, 2013
March 19, 2013
May 03, 2013
*: Per cent of net demand and time liabilities. @: With effect from Feb 13, 2012 Bank Rate was aligned to MSF rate. Note: Figures in parentheses
indicate changes in percentage points.

15.
Why & Why Not in…
 Equities
 Real Estates
 Mutual Funds
 Government Bonds

16.
 It can have significant impact on every
asset class
 Awareness of monetary policy, helps to
position the portfolios to benefit from
policy changes and boost returns

17.
Rbi.org.in
Wikipedia
Investopedia
Economic times
Youtube
Financial express
Investorwords.com