BANKING AFFAIRS

Detailed explanation-1: -Overview. Under the Reserve Bank of India, Act, 1934 (RBI Act, 1934 ) (as amended in 2016), RBI is entrusted with the responsibility of conducting monetary policy in India with the primary objective of maintaining price stability while keeping in mind the objective of growth.

Detailed explanation-2: -The RBI Act states monetary policy as the employment of financial instruments under its control to standardise magnitudes such as credit availability, interest rates, and money supply to attain the ultimate goal of economic policy.

Detailed explanation-3: -Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market. Open market operations affect short-term interest rates, which in turn influence longer-term rates and economic activity.

Detailed explanation-4: -Cash Reserve Ratio (CRR) is one of the main components of the RBI’s monetary policy, which is used to regulate the money supply, level of inflation, and liquidity in the country. The higher the CRR, the lower is the liquidity with the banks and vice-versa.

Detailed explanation-5: -Chairman of the Monetary Policy Committee is the governor of RBI.