BANKING AFFAIRS

Detailed explanation-1: -1) The stock of monetary gold Held in reserves as a backing to paper currency is not included in money supply. This is so because it is not permitted to circulate within the country. 2) The cash held by commercial banks Is not included in money supply.

Detailed explanation-2: -Money supply includes the currency that is in circulation with the public at a particular point of time, hence it does not include the money held by government or commercial banks as it is not in circulation with the public at a a given point in time.

Detailed explanation-3: -’Government’s currency liabilities to the public’ comprise rupee coins and small coins. he Reserve Banks net foreign assets are its holdings of foreign currency assets and gold.

Detailed explanation-4: -Instead, the Reserve Bank of India has developed four alternative measures of money supply in India. These four alternative measures of money supply are labelled M1, M2, M3 and M4. The RBI will collect data and calculate and publish figures of all the four measures.