Components of Monetary Policy

Considered as the most dynamic and sensitive function of the RBI, monetary policy chiefly aims at regulating the size and cost of fund/money in the economic system.

In simple terms, monetary policy refers to the policy of the RBI with regard to the use of monetary instruments under its control to achieve its goals.

Instruments of Monetary Policy

  • Repo Rate: The (fixed) interest rate at which the Reserve Bank provides overnight liquidity (loans) to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
  • Reverse Repo Rate: The (fixed) interest rate at which the Reserve Bank ....
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