Question

Explain the quantitative instruments of monetary policy. Explain the mechanism and effectiveness of Bank rate as instrument of monetary policy.

Answer 1

The RBI is the central bank of India. It was established in 1935 under a special act of the parliament. The RBI is the main authority for the monetary policy of the country. The main functions of the RBI are to maintain financial stability and the required level of liquidity in the economy.

The RBI also controls and regulates the currency system of our economy. It is the sole issuer of currency notes in India. The RBI is the central banks that control all the other commercial banks, financial institutes, finance firms etc. It supervises the entire financial sector of the country.