apna sapna money-money. rbi rbi monetary policy and industrial policy by- by- rahul jain

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Apna Sapna Money-Money Apna Sapna Money-Money

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Page 1: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Apna Sapna Money-MoneyApna Sapna Money-Money

Page 2: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

RBIRBI

Page 3: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Monetary Policy and Monetary Policy and Industrial PolicyIndustrial Policy

By-By-

Rahul Jain Rahul Jain

Page 4: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Monetary PolicyMonetary Policy

The term "monetary policy" refers to the actions The term "monetary policy" refers to the actions undertaken by a central bank, such as the RBI, undertaken by a central bank, such as the RBI, to influence the availability and cost of money to influence the availability and cost of money and credit to help promote national economic and credit to help promote national economic goals.goals.

Page 5: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Tools of monetary policyTools of monetary policy

Thus the three ways in which the federal Thus the three ways in which the federal reserve can change the money supply are reserve can change the money supply are 1. Change in Bank Rate 1. Change in Bank Rate 2. Open Market operations like buying and 2. Open Market operations like buying and purchasing of government securities purchasing of government securities 3. Change in Cash reserve ratio and SLR3. Change in Cash reserve ratio and SLR

Page 6: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

SLR REQUIREMENTSSLR REQUIREMENTS

Banks, NBFCs, and HFIs are required to invest in Banks, NBFCs, and HFIs are required to invest in government securities and other approved debt government securities and other approved debt instruments and securities to comply with the instruments and securities to comply with the SLR requirements of the RBI. SLR requirements of the RBI.

The SLR, which is the minimum level of The SLR, which is the minimum level of investment in approved securities, computed daily, investment in approved securities, computed daily, is a percentage of the outstanding net demand and is a percentage of the outstanding net demand and time liabilities (NDTL) of banks.time liabilities (NDTL) of banks.

For NBFCs and HFIs, SLR is a percentage of their For NBFCs and HFIs, SLR is a percentage of their outstanding public deposits.outstanding public deposits.

Page 7: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Increase in Money SupplyIncrease in Money Supply

1. Reduction in bank rate,  specific interest rate 1. Reduction in bank rate,  specific interest rate on loans and savings on loans and savings 2. Buying  of government securities from bank 2. Buying  of government securities from bank to increase the money supply to increase the money supply 3. Reduction in the variable reserve ratios like 3. Reduction in the variable reserve ratios like statutory liquidity ratio and cash reserve ratio. statutory liquidity ratio and cash reserve ratio.

(Mishra & Puri)(Mishra & Puri)

Page 8: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Reduction in Money SupplyReduction in Money Supply

1. Rise in bank rate, specific interest rate on 1. Rise in bank rate, specific interest rate on loans and savings loans and savings

2. Selling of government securities to bank to 2. Selling of government securities to bank to curb inflation and to contract the money curb inflation and to contract the money supply supply

3. Increase in the variable reserve ratios like 3. Increase in the variable reserve ratios like statutory liquidity ratio and cash reserve ratio. statutory liquidity ratio and cash reserve ratio.

Page 9: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

InflationInflation

In economics, inflation is an increase in the In economics, inflation is an increase in the general level of prices of a given kind. General general level of prices of a given kind. General inflation is referred to as a rise in the general inflation is referred to as a rise in the general level of prices. level of prices.

Page 10: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Measuring InflationMeasuring Inflation

Use of price index system for measuring Use of price index system for measuring inflation. inflation. For example, The Consumer Price Index (CPI) For example, The Consumer Price Index (CPI) is a measure of the average change over time is a measure of the average change over time in the prices paid by urban consumers for a in the prices paid by urban consumers for a market basket of consumer goods and services market basket of consumer goods and services

Page 11: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Causes of InflationCauses of Inflation

Cost Push Cost Push Demand LedDemand Led

Page 12: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Costs of InflationCosts of Inflation

It leads to uncertainty about the value of It leads to uncertainty about the value of money money

It can lead to recessionIt can lead to recession It can hurt the productivityIt can hurt the productivity

Page 13: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Fear of InflationFear of Inflation

Can destabilize the economyCan destabilize the economy Can lead to reduction in Purchasing PowerCan lead to reduction in Purchasing Power

Page 14: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

RBIRBIEstablishmentEstablishment

•The Reserve Bank of India was established on The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.of the Reserve Bank of India Act, 1934.•The Central Office of the Reserve Bank was The Central Office of the Reserve Bank was initially established in Calcutta but was initially established in Calcutta but was permanently moved to Mumbai in 1937. The permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and Central Office is where the Governor sits and where policies are formulated.where policies are formulated.•Though originally privately owned, since Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully nationalization in 1949, the Reserve Bank is fully owned by the Government of India.owned by the Government of India.

Page 15: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

PreamblePreamble

"...to regulate the issue of Bank Notes and keeping "...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary of reserves with a view to securing monetary stability in India and generally to operate the stability in India and generally to operate the currency and credit system of the country to its currency and credit system of the country to its advantage." advantage."

Page 16: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Central Board Central Board The Reserve Bank's affairs are governed by a The Reserve Bank's affairs are governed by a

central board of directors. The board is central board of directors. The board is appointed by the Government of India in appointed by the Government of India in keeping with the Reserve Bank of India Act. keeping with the Reserve Bank of India Act.

Appointed/nominated for a period of four years Appointed/nominated for a period of four years Constitution:Constitution:

Official DirectorsOfficial Directors Full-time : Governor and not more than four Deputy Full-time : Governor and not more than four Deputy

GovernorsGovernors

Page 17: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Central Board Central Board

Non-Official DirectorsNon-Official Directors Nominated by Government: ten Directors from various Nominated by Government: ten Directors from various

fields and one government Official fields and one government Official Others: four Directors - one each from four local boardsOthers: four Directors - one each from four local boards

Functions : General superintendence and Functions : General superintendence and direction of the Bank's affairsdirection of the Bank's affairs

Page 18: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Local BoardsLocal Boards One each for the four regions of the country in One each for the four regions of the country in

Mumbai, Calcutta, Chennai and New Delhi Mumbai, Calcutta, Chennai and New Delhi

Membership: Membership: consist of five members each consist of five members each appointed by the Central Government appointed by the Central Government for a term of four yearsfor a term of four years Functions : To advise the Central Board on local Functions : To advise the Central Board on local

matters and to represent territorial and economic matters and to represent territorial and economic interests of local cooperative and indigenous banks; interests of local cooperative and indigenous banks; to perform such other functions as delegated by to perform such other functions as delegated by Central Board from time to time. Central Board from time to time.

Page 19: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Main objectivesMain objectives

1. Monetary authority1. Monetary authority Formulates, implements and monitors the Formulates, implements and monitors the

Monetary Policy, announced twice a year. Monetary Policy, announced twice a year. Announces the Credit Policy, announced Announces the Credit Policy, announced

twice a year - in April it announces new twice a year - in April it announces new policy initiatives, the October pronouncement policy initiatives, the October pronouncement is a review of the April policy. is a review of the April policy.

Objective: Maintaining price stability and Objective: Maintaining price stability and ensuring adequate flow of credit to ensuring adequate flow of credit to productive sectors. productive sectors.

Maintain optimum Liquidity in the economy. Maintain optimum Liquidity in the economy.

Page 20: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Doing Business in India Simplified

Page 21: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

India’s Industrial PolicyIndia’s Industrial PolicyThe Indian government has removed bureaucratic The Indian government has removed bureaucratic controls on industry, under its liberalization policy. controls on industry, under its liberalization policy. However, licensing and restrictions still exist in the However, licensing and restrictions still exist in the following sectors: following sectors:

Two sectors reserved for public sector viz., Atomic Two sectors reserved for public sector viz., Atomic Energy and RailwaysEnergy and Railways

Five Industries in which licensing is compulsory – Five Industries in which licensing is compulsory – Distillation and brewing of alcoholic drinksDistillation and brewing of alcoholic drinks Cigars and cigarettes of tobaccoCigars and cigarettes of tobacco Electronic Aerospace and Defence equipmentElectronic Aerospace and Defence equipment Industrial explosivesIndustrial explosives Hazardous chemicalsHazardous chemicals

Page 22: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Manufacture of items reserved for Small Scale Manufacture of items reserved for Small Scale Sector.Sector.

Proposals attracting locational restrictionsProposals attracting locational restrictions

GREAT OPPORTUNITIES FOR US FDI!GREAT OPPORTUNITIES FOR US FDI!

Note Note – The exemption from licensing also – The exemption from licensing also applies to all substantial expansion of existing applies to all substantial expansion of existing units.units.

Page 23: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Foreign Investment in IndiaForeign Investment in India

Foreign Direct Investment (“FDI”)Foreign Direct Investment (“FDI”)

Opportunities exist for investing in India in sectors as diverse Opportunities exist for investing in India in sectors as diverse as tourism and infrastructure, petrochemicals and mining as tourism and infrastructure, petrochemicals and mining technology and engineering, real estate, biotechnology, bio-technology and engineering, real estate, biotechnology, bio-informatics and nanotechnology. India is also being seen as informatics and nanotechnology. India is also being seen as the global destination for R&D, engineering design and the global destination for R&D, engineering design and prototype development and a manufacturing hub for high prototype development and a manufacturing hub for high technology productstechnology products..

Page 24: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

FDI PolicyFDI Policy

According to the current policy, FDI is not permitted in the According to the current policy, FDI is not permitted in the following sectors – following sectors –

Certain sectors, namely:Certain sectors, namely: Atomic energy;Atomic energy; Lottery business/gambling and betting;Lottery business/gambling and betting; Agriculture (excluding floriculture, horticulture, seed Agriculture (excluding floriculture, horticulture, seed

development, animal husbandry, pisciculture and cultivation development, animal husbandry, pisciculture and cultivation of vegetables, mushrooms, etc.)of vegetables, mushrooms, etc.)

Plantations (excluding tea plantation)Plantations (excluding tea plantation) Retail Trading (other than single brand retail)Retail Trading (other than single brand retail)

Page 25: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

Investment by Foreign Institutional Investors Investment by Foreign Institutional Investors (“FII”)(“FII”)

An FII must be registered with SEBI and must comply with An FII must be registered with SEBI and must comply with certain investment limits. They may purchase shares and/or certain investment limits. They may purchase shares and/or convertible debentures of an Indian company under the convertible debentures of an Indian company under the Portfolio Investment Scheme.Portfolio Investment Scheme.

The shares/convertible debentures of an Indian company The shares/convertible debentures of an Indian company must be purchased through registered brokers on must be purchased through registered brokers on recognized stock exchanges in India. recognized stock exchanges in India.

FII’s are also permitted to purchase shares/convertible FII’s are also permitted to purchase shares/convertible debentures of an Indian company through private debentures of an Indian company through private placement/arrangement.placement/arrangement.

Foreign pension funds, mutual funds, investment trusts, Foreign pension funds, mutual funds, investment trusts, asset management companies, nominee companies and asset management companies, nominee companies and incorporated/institutional portfolio managers or their power incorporated/institutional portfolio managers or their power of attorney holders may invest In India as FIIs. of attorney holders may invest In India as FIIs.

Page 26: Apna Sapna Money-Money. RBI RBI Monetary Policy and Industrial Policy By- By- Rahul Jain

ReferencesReferences

www.bls.gov www.bls.gov Mishra & Puri , MACRO ECONOMICS. Mishra & Puri , MACRO ECONOMICS.

Sultan Chand & Sons Sultan Chand & Sons www.americanchronicle.com/articles/www.americanchronicle.com/articles/

viewArticle.aspviewArticle.asp www.economics.about.comwww.economics.about.com www.investopedia.comwww.investopedia.com www.en.wikipedia.orgwww.en.wikipedia.org