Monetary policy is controlled by 

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  1. Central Government
  2. State Government
  3. Central Bank
  4. Private Sector

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Option 3 : Central Bank
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The correct answer is Central Bank.Key Points

  • The central bank of India which regulates the monetary market in India is Reserve Bank of India.
  • Monetary Policy refers to the use of monetary instruments under the control of the central bank to regulate magnitudes such as interest rates, money supply, and availability of credit with a view to achieving the ultimate objective of economic policy.
  • The Monetary Policy Committee (MPC) constituted by the Central Government under Section 45ZB determines the policy interest rate required to achieve the inflation target.
  • The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
  • The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
  • Monetary policy is RBI's initiative to achieve price stability, financial stability, and adequate availability of credit for growth.
  • It is also used to manage economic growth, unemployment, and inflation.
  • Objectives of Monetary Policy:
    • To regulate the money supply in the economy.
    • To attain price stability of money in the market.
    • To promote economic growth and development.
    • To maintain the neutrality of money.
    • To promote employment.
  • Monetary policies include Bank Rate, Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), Repo Rate, Reverse Repo Rate, and Open Market Operations.

Additional Information 

  • Reserve Bank of India (RBI):
    • RBI was set up on the basis of the Hilton Young Commission recommendation in April 1935, with the enactment of the RBI Act, 1934.
    • Its first Governor was C.D. Deshmukh.
    • The headquarters of RBI is in Mumbai.
    • Current Governor is Shaktikanta Das. (As of Aug 2022)
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