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RBI Policy On Inflation

December 8th, 2009

RBI Policy On Inflation

The Reserve Bank of India is the central bank of India and hence it is the duty of the central bank of the country to reduce the rate of inflation in case it goes high. The central bank works for the welfare of the public of the country. It often gives loans to the central as well as the state government whenever they are in need of it. The central bank has to manage the money supply to the country as it is the Banker of the government and the people. One important thing to note is unlike many other private or nationalized banks that exist in the country, the reserve bank of India is not a profit making institute. The major function of the Reserve bank of India is hence to curb the inflation rate with in the acceptable norms.

Since the major economic reforms that took place in the year 1991 under the then finance minister Mr. Manmohan singh also affected the policies of the Reserve bank of India tremendously. The Reserve bank has now adopted a policy of the relaxation of interest rates and thus having more influence on the market of the country. The Reserve bank also has a monetary policy that makes an effort to increase the advantages regarding the money control policy of the banks.

The major way of fighting and curbing inflation is to be able to decrease the aggregate spending monetary policy that can thus help in reducing the pressure due to demand. How the monetary policy works is by controlling the cost and the availability of the credit resources. But how effective this method of curbing inflation can be depends largely on the co operation of other commercial private and nationalized banks. Also the cash reserve ratio can be changed inn order to reduce the effects of inflation.

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