“ FINANCIAL PLANNING
Submitting to : Prof. Manoj Ahuja
STUDENT MANAGERS
NAME ENROLLMENT NUMBER
Runa Tanwar PG23DMG2077
Sakshi wani PG23DMG2029
Smrati Soni PG23DMG2123
Suman kumar PG23DMG2114
Shivani Mondal PG23DMG2016
Vikas Bhagat PG23DMG2020
Sapana Gupta PG23DMG2142
Manthan Tekale PG23DMG2103
Presentation Goals
1. Monetary policy in India
2. The role of the RBI
3. The objectives of monetary policy
4. The policy instruments used
5. The challenges and future outlook
Introduction to Monetary
policy
Monetary policy in India is the process by which the Reserve Bank of India (RBI), the
country's central banking institution, manages the money supply and interest rates to
achieve macroeconomic objectives such as price stability, economic growth, and full
employment.
The RBI plays a crucial role in shaping the country's economic landscape through its
monetary policy decisions, which have far-reaching implications for individuals,
businesses, and the overall economy.
Role of the Reserve Bank of India (RBI)
Monetary policy Financial Stability Economic Development
Formulation
The RBI is responsible for The RBI also plays a In addition to its monetary
formulating and crucial role in policy and financial
implementing India's maintaining financial stability responsibilities
monetary policy. stability in the country.
India’s economic
This involves setting key It oversees the banking development through
interest rates, managing the sector, regulates initiatives such as
money supply, and using financial institutions, promoting financial
various policy instruments to and takes measures to inclusion, supporting small
influence economic conditions ensure the smooth and medium enterprises,
and achieve the desired functioning of the and facilitating
Objectives of Monetary Policy
1 Price Stability
The primary objective of the RBI's monetary policy is to maintain price stability, which
involves controlling inflation and ensuring that the general price level in the economy
remains stable.
2 Economic Growth
Monetary policy also aims to support economic growth by promoting availability of
credit, maintaining financial stability, and creating an environment conducive for
investment and business activity.
3 Full Employment
The RBI also considers the goal of achieving and maintaining full employment, as high
levels of employment can contribute to economic growth and development.
4 External Sector Stability
Monetary policy decisions also seek to ensure stability in the external sector, which
includes managing the exchange rate and maintaining a healthy balance of payments
Monetary Policy Instruments
1 Interest Rates
The RBI uses key interest rates, such as the repo rate, reverse
repo rate, and bank rate, to influence the cost of borrowing and
the availability of credit in the economy.
2 Reserve Requirements
The RBI sets the cash reserve ratio (CRR) and the statutory
liquidity ratio (SLR), which require banks to hold a certain
percentage of their deposits as reserves, thereby affecting the
money supply.
3 Open Market Operations
The RBI conducts open market operations, including the
purchase and sale of government securities, to manage liquidity
and influence interest rates in the economy.
Interest Rate Decisions
Monetary Policy Factors Considered Transparency and
Committee Communication
The Monetary Policy Committee (MPC) The MPC considers a range of The RBI aims to maintain a high
of the RBI is responsible for making economic indicators, such as degree of transparency in its
periodic decisions on interest rates inflation, growth, employment, monetary policy decisions and
and other monetary policy measures. and global economic conditions, to communication. It regularly
The MPC consists of the Governor of determine the appropriate policy publishes reports, statements,
the RBI and other members, who stance and interest rate decisions and press conferences to provide
collectively assess the economic that will help achieve the insights into its policy stance and
conditions and vote on the objectives of monetary policy. the rationale behind its decisions.
appropriate policy actions.
Inflation Targeting Framework
Inflation Target
The RBI has adopted an inflation targeting framework, which aims to maintain
consumer price inflation within a target range of 4% with a tolerance band of
+/- 2 percentage points.
Monetary Policy Committee
The MPC is responsible for setting the policy repo rate to achieve
the inflation target and maintain price stability in the economy.
Policy Flexibility
The RBI has the flexibility to adjust its policy stance and instruments as
needed to respond to changing economic conditions and ensure that the
inflation target is met.
Accountability
The RBI is accountable to the government for meeting the inflation target
and is required to submit regular reports on its monetary policy decisions
and their impact.
Liquidity Management
Liquidity Monitoring
The RBI closely monitors the liquidity conditions in the
financial system and takes appropriate measures to
ensure adequate liquidity to support economic
activities.
Liquidity Injections
The RBI uses various tools, such as open market
operations, variable rate repos, and refinance facilities,
to inject liquidity into the system when required.
Liquidity Withdrawals
Conversely, the RBI also conducts operations to
withdraw excess liquidity from the system, such as
through reverse repos and the sale of government
securities.
Transmission Mechanism of
Monetary Policy
1 Interest Rate Channel
Changes in the policy interest rates set by the RBI directly affect
the lending and deposit rates of banks, which in turn impact the
borrowing and spending decisions of households and businesses.
2 Credit Channel
Monetary policy actions also influence the availability and cost of
credit in the economy, affecting investment and consumption
decisions of economic agents.
3 Exchange Rate Channel
Monetary policy decisions can impact the exchange rate of the
Indian rupee, which in turn affects the prices of imported goods
and the competitiveness of exports, influencing the external
sector.
Challenges and Future Outlook
Balancing Growth and Financial Sector Stability Emerging Challenges
Inflation
The RBI must also ensure the Additionally, the RBI faces
One of the key challenges for
stability of the financial emerging challenges, such as the
the RBI is to strike a delicate
sector, as it plays a crucial growing importance of digital
balance between supporting
role in the transmission of payments, the rise of fintech, and
economic growth and
monetary policy and the the need to adapt its policy
maintaining price stability,
overall economic framework to address these new
especially in the face of
development of the country. developments in the financial
global economic
ecosystem.
uncertainties and domestic
supply-side pressures.
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