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Forms of money:
-Currency: Ihe Reserve Bank of India issues currency notes on behalf of the
central government. MEdium of exchange
-Bank: demand deposits,cheque
Loan:
-Deposit/borrow/ROI
Formal: Supervision
Informal:
Debttrap
Credit:
-profit: positive role in this situation
-loss: pushes the borrower into a situation from which recovery is very
painful.
TERMS OF CREDIT:
- Collateral: It is an asset a browwer owns and uses as a guarantee to a
lender until loan is paid
- Intrest rate:
- Document requirment
- Mode of repayment
Monetary policy:(MoP)
-Stabilising the volatile prices.
-Central bank(RBI) has the power to arrest the price fluctuations by means of
monetart polices
-Role: To ensure price stablility caused by,
Inlfation,deflation(Control)
Maintain financial conditions for sustaining growth
-Price stability is the pre-requisite for economic growth
Defination:
-It is a process by which country controls the supply of money and,
-Targeting the rate of intrest for purpose of promoting economic growth and
stablitity
Goals:
-Stabilise the prices
-reduce unemployment level
Instruments of MoP
-Quantitative(supply of money)
-Bank rate(Discount rate)
-Official rate at which RBI provides loan to
bank(commercial/cooperative/development banks)
-Given by means of:
-Direct lending
-Rediscounting(Buying back) the bills of commercial banks
and treasury bills
#### Money supply need to be incresed they grant loan at lower ROI(Low Bank rate) >
Incre percapita income and vice versa
-Qualitative(Qualitative lending):
-It controls the purpose for which loans are assigned to banks