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🎊Monetary policy and its framework 🎊


👉The Reserve Bank of India (RBI) is vested with the responsibility of
conducting monetary policy.

👉This responsibility is explicitly mandated under
the Reserve Bank of India Act, 1934.

👉Monetary policy refers to the use of monetary instruments under the
control of the central bank to regulate magnitudes such as interest
rates, money supply, and availability of credit with a view to achieving the
ultimate objective of economic policy, while keeping in mind the objective of
growth specified in the Act

👉The framework aims at setting the policy repo rate based on an
assessment of the current and evolving macroeconomic situation and
modulation of liquidity conditions to anchor money market rates at or around
the repo rate.

👉As per the provisions of the RBI Act, out of the six Members of the Monetary
Policy Committee, three Members will be from the RBI, and the other three
Members of MPC will be appointed by the Central Government.

👉The Governor of the Reserve Bank of India is the chairperson ex officio of the
committee.

👉The committee was created in 2016 to bring transparency and accountability
in fixing India's Monetary Policy.


👉Instruments of Monetary Policy:
There are several direct and indirect instruments that are used for
implementing monetary policy but main instrument of monetary policy is below
1. Cash Reserve Ratio,
2. Statutory Liquidity Ratio,
3. Bank Rate,
4. Repo Rate,
5. Reverse Repo Rate,
6. Open Market Operations


✨what monetary policy good or not? ✨
👉Monetary policy can offset a downturn because lower interest rates reduce consumers' cost of borrowing to buy big-ticket items such as cars or houses.
For firms, monetary policy can also reduce the cost of investment.