Presentation of Banking
-
Upload
jaideep-sandhu -
Category
Documents
-
view
226 -
download
0
Transcript of Presentation of Banking
-
8/3/2019 Presentation of Banking
1/17
Monetary
Policy
Submitted by:-Shivangi Aggarwal
Roll no.:- 2908Navjot kaur
Roll no.:-2907
Submitted to:-Mrs. Shallu.
-
8/3/2019 Presentation of Banking
2/17
Monetary Policy
Regulation of supply of Money and Cost and Availability of Credit in the
economy
Variables affected by Monetary Policy in the economy
Interest Rates
Liquidity
Credit Availability
Exchange Rates
Purpose of Monetary Policy
Maintain price stability, ensure adequate flow of credit to the productivesectors of the economy and overall economic growth
-
8/3/2019 Presentation of Banking
3/17
Monetary Policy RBIs role
Demand for Money Demand for goods/services
Control on bankcredit when prices
rise/fall
Ensuring pricestability and ensuring
savings
Control on moneysupply, velocity of
circulation of moneyduring inflation
Instruments such as CRR,OMO & Bank Rate
-
8/3/2019 Presentation of Banking
4/17
-
8/3/2019 Presentation of Banking
5/17
0.27 (New low in 30 years)Inflation
6.0%Bank Rate
5.0CRR
24.0%SLR
5.0%Repo Rate
3.5%Reverse Repo Rate
12.75% 13.25%PLR
50.9
5Re/$
Current Rates
-
8/3/2019 Presentation of Banking
6/17
Target Variables
-Inflation
-Interest rate
-Real GDP
-Employment
-Consumption
-Savings-Investment
Policy Variables
- Money supply
- OMO: Liquidity conditions
- policy rates (CRR, repo etc.)
Monetary Policy Influence
-
8/3/2019 Presentation of Banking
7/17
CRR Movement
Before 1991
Government raised funds belowmarket rate
No depth in Government SecuritiesMarket
Regulation of deposit rates
Under developed financial markets,Less financial instruments availability
Result
Complex, distorted interest ratestructure
Adversely affected viability andprofitability of banks
Transparency and norms could not befollowed strictly
-
8/3/2019 Presentation of Banking
8/17
Boost Economy after
2001 Slowdown /
dotcom bubble
Stable CRR from
2004 to 2006
Rise in CRR to control liquidity,
due to Heavy Capital Inflow &
to curb Re Appreciation
CRR hikes to
curb inflation
CRR Cuts to boost
economy after
Sub prime loss /
Global meltdown
CRR Movement
-
8/3/2019 Presentation of Banking
9/17
http://www.rgemonitor.com/emergingmarkets-monitor/archive/200806/
Uncontrolled Inflation despite
Further CRR hikes
CRR hikes proved to
Be effectiveTo curb Inflation
Inflation Down on account
of global credit crunch
Inflation Movement
-
8/3/2019 Presentation of Banking
10/17
Stable SLR from
1998 onwards
SLR Movement
Banks to made available more funds
& More Efficiency
-
8/3/2019 Presentation of Banking
11/17
Repo rate reduction due to make
credit available at cheaper rates
Repo and Reverse Repo rates Movement
Increased rates to control the liquidity
-
8/3/2019 Presentation of Banking
12/17
LAF - To Control Exchange Ratio
Outflow of $ from India Market
Sterilization to
Control rupee
Appreciation
Exchange Rate Movement
-
8/3/2019 Presentation of Banking
13/17
The Surge in Foreign Exchange Reserves
www.rgemonitor.com/blog/economonitor/248231
Sterilization / Selling bonds
& Buying dollars
Forex Reserves Position
-
8/3/2019 Presentation of Banking
14/17
14
Global GDP -0.6%
Estimated PPP
Global Growth0.5%
Recession
Demand Slump
Production
Plunge
Job losses
Tighter credit
World trade
contraction by2.8%
Aggressive and unconventional measures taken by
Governments and central banks
Current Global Scenario
-
8/3/2019 Presentation of Banking
15/17
Money and credit market
Local
Institutions
Domestic
Banks
Domestic MFs NBFC
$Re
Financial Channel
Impact on India
-
8/3/2019 Presentation of Banking
16/17
Cannot simultaneously stimulate economic demand to reduceunemployment and restrain demand to combat inflation
Monetary policy is restricted by the impact of other government
actions, especially Fiscal policy, i.e. decisions about governmentexpenditures and taxation
Problems of an inflexible labour market, inadequate infrastructureand, most important, fiscal policy whose discipline is open to
question limits the effectiveness of the Monetary policy
16
Monetary Policy cannot work in isolation!!Monetary Policy cannot work in isolation!!
Limitations Monetary Policy
-
8/3/2019 Presentation of Banking
17/17
Thank You