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Instruments of monetary policy in india

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Essentially the central bank relies on five instruments to influence money Supply interest rates etc. and in turn influences the course of entire economy. They are: • Reserve ratios Bank rate Open market operations
• Margin requirements Moral suasion
The above list is not an exhaustive list. The central bank may adopt other measures as RB1 does in India depending upon the purpose at hand. The first three are the general instruments because they influence the nation’s money supply and general availability of credit. These are calld quantitative instruments. The fourth and fifth are selective or quantities, instruments. These are aimed at affecting changes in the availability of credit with respect to particular (i.e.
selective) sectors of the economy Quantitative instruments are called ‘quantitative’ because they affect the total volume (or quantity) of money supply and credit in the countorY. Selective instruments are called selective because they are aimed at the movement of credit towards selective sectors of the economy. Let us explain each set of instruments

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