Banking and Monetary Policy

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The word 'bank' originated from the Italian word 'banca' or French word 'banque', both meaning 'bench'. In olden days, European money lenders displayed coins on benches for lending or exchanging. In S…

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The two main types of banks are: 1) Commercial Banks - Business units that provide banking services for profit by accepting deposits and lending money. 2) Central Banks - Apex banks that manage, evalu…

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1) Current Account Deposits - Most liquid, unlimited withdrawals, no interest, used for business transactions. 2) Savings Account Deposits - For short-term savings, earns interest, limited withdrawals…

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Credit creation is the process where banks create new money from existing deposits. Formula: Credit Creation = Primary Deposit × (1/Cash Reserve Ratio). Example: If primary deposit is ₹1,000 and CRR i…

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RBI is India's central bank established on April 1, 1935 under the RBI Act of 1934 with private paid-up capital of ₹5 crores. It was nationalized on January 1, 1949. RBI is the apex bank that supervis…

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1) Currency Issue - Sole right to issue notes of ₹2 and above. 2) Banker to Government - Manages government accounts and bonds. 3) Bankers' Bank - Regulates scheduled banks and lender of last resort.

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Monetary policy is the policy undertaken by the apex bank (RBI) to regulate the supply of money in the economy to maintain economic stability while considering economic development and public interest…

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Bank Rate is the rate at which RBI lends to commercial banks for long-term. When bank rate increases, commercial banks borrow less (expensive borrowing), leading to fewer loans to public at higher rat…