FUNCTIONS OF CENTRAL BANK
TRADITIONAL FUNCTION:
PROMOTIONAL FUNCTION:
EXIM LIC IDBI SIDBI
MONETARY POLICY
Definition: According to A.G.Hart, “A
policy which influences the public stock
of money substitute of public demand for
such assets of both that is policy which
influences public liquidity position is
known as monetary policy.”
QUANTITTATIVE
INSTRUMENTS:
Bank Rate
Open Market Operations(OMOs)
QUALITATIVE
INSTRUMENTS:
Credit Rationing
Direct Action
Margin Requirement
CREDIT CREATION BY
COMMERCIAL BANK
First important source of money
supply.
Second important source of money
supply.
Bank Liabilit
Bank 3
90.5
85.98
4.52
90.5
-
-
-
-
CASH RESERVE RATIO
OBJECTIVES FOR
MAINTAINING SLR:
BANK RATE
It is also called as discount rate.
It is the rate of interest which a central
bank charges on the loans & advances provided to commercial banks.
It is the only rate which helps the
economy in controlling inflation & deflation.
It serves as a basic parameter to the
REVERSE REPO RATE
Opposite of repo rate.
Rate at which RBI borrows the
money.
RBI uses this as a tool.
The amount that an investor must
deposit in a margin account before
buying on margin or selling short,
as required by the Federal Reserve
Board’s regulation.
The amount that an investor must
deposit in a margin account before
buying on margin or selling short,
as required by the Federal Reserve
Board’s regulation.
RATIONING OF CREDIT
RATIONING OF CREDIT
The bank was unable to perfectly distinguish
the risky borrowers from safe ones.
The loan contracts were subject to limited
