Monetary Tools Of The Central Bank
Various monetary tools are used by the central bank to control the money supply in the economy. The main monetary control instruments of the Central Bank are CRR(Cash Reserve Ratio), SLR(Statutory Liquidity Ratio), Repo-rate and Reverse repo-rate. With each of these instruments, the central bank can affect the supply and demand of money in the economy. Following is a discussion of each of these tools: 1. Cash Reserve Ratio(CRR): It is the legal rules issued by the central bank and implemented on the all bank. Example: In the bank, total deposit is 50% then the central bank required fixed deposit of 10% in its own bank ( that is: Central Bank) and remaining 40% will remain in the bank itself (that is: commercial or government bank) which can be regulate in the authority of bank itself. 2. Statutory Liquidity Ratio(SLR): It is also the legal rule...