Monetary Policy
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Central Banking (Elective) — CAIIB.
One-liners from this chapter
Free sample — 8 of 40 rapid-fire Q&A cards.
Ultimate Objectives — Examples / Notes?
Examples: Price stability, Growth, Employment; Notes: What the central bank finally wants.
Intermediate Targets — Examples / Notes?
Examples: Money supply, Nominal income, Exchange rate; Notes: What policy operates on on the way to the goal.
MSF / Bank Rate (ceiling) — Rate (as of 10-Jun-2026) / Function?
Rate (as of 10-Jun-2026): 5.50 %; Function: Penal overnight borrowing by dipping into SLR (up to 2 %)
Policy Repo Rate (middle) — Rate (as of 10-Jun-2026) / Function?
Rate (as of 10-Jun-2026): 5.25 %; Function: Anchor rate — set by MPC
SDF (floor) — Rate (as of 10-Jun-2026) / Function?
Rate (as of 10-Jun-2026): 5.00 %; Function: Non-collateralised overnight deposit by banks with RBI
1 — Mechanism / Core Idea?
Mechanism: Quantity Theory (QTM); Core Idea: Fisher's MV = PT — a change in M directly changes P; Friedman gave it a modern reincarnation.
2 — Mechanism / Core Idea?
Mechanism: Real Balance Effect; Core Idea: Change in M/P alters real wealth consumption-savings decisions (Patinkin).
3 — Mechanism / Core Idea?
Mechanism: Interest Rate Mechanism; Core Idea: Keynesian — M affects bond rate investment output.
PDF study notes
More chapters in Module C - Monetary Policy and Credit Policy
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