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Which of the following is NOT an instrument of monetary policy in India?

Which of the following is NOT an instrument of monetary policy in India? Correct Answer Call money rate

Monetary policy is the utilization of monetary tools under the control of the central bank to regulate magnitudes such as interest rates, money supply, and credit availability in order to achieve the ultimate goal of economic policy.

Key Points

  • Reserve Bank of India Act of 1934 mentioned the responsibility of The Reserve Bank of India (RBI) to manage the monetary policy of India. 
  • RBI employed direct and indirect instruments to manage the monetary policy.
  • The instruments are used by RBI as a part of their monetary policies are mentioned in the chart: 
Instruments of RBI
Repo Rate
Reverse repo rate
Liquidity adjustment facility
Bank rate
Cash Reserve Ratio
Statutory Liquidity Ratio
Market Stabilisation Scheme
Open Market Operations 
Corridor

Hence, the Call money rate is NOT an instrument of monetary policy in India. 

Important Points

  • The call money rate at which short-term funds are borrowed and lent in the money market. 
  • Banks' day-to-day cash requirements are handled through call money.
  • When Banks run short on funds borrowed for a period of 1-14 days from other commercial banks.
  • Call money rate is when a bank borrows money for a single day.
  • Notice money is money borrowed for more than one day but no more than 14 days.

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