NOTES

Monetary Policy is a strategy used by the Reserve Bank of India to control and regulate the money supply in an economy. It is also known as credit policy. In India, the Reserve Bank of India looks after the circulation of money in the economy. The main purposes of the monetary policy include bringing price stability, controlling inflation, strengthening the banking system, economic growth, etc. The monetary policy focuses on all the matters which have an influence over the composition of money, circulation of credit, interest rate structure. There are two types of monetary policies, i.e. expansionary and contractionary.

Expansionary Monetary Policy: The policy in which the money supply is increased along with minimization of interest rates is known as Expansionary Monetary Policy.
Contractionary Monetary Policy : On the other hand, if there is a decrease in money supply and rise in interest rates, that policy is regarded as Contractionary Monetary Policy.
The measures adopted by the apex bank to control credit in the economy are broadly classified into two categories:
General Measures (Quantitative Measures)
Selective Measures (Qualitative Measures)