Which of the following formulates, implements and monitors the monetary policy in India?

Correct option is C

The correct answer is: (c) RBI

• The Reserve Bank of India (RBI) is the central bank of India, established in 1935. It is responsible for formulating, implementing, and monitoring the monetary policy in India.

• The RBI uses several tools such as the repo rate, reverse repo rate, and cash reserve ratio (CRR) to regulate money supply, control inflation, and stabilize the economy.

• It plays a crucial role in managing the currency and foreign exchange reserves, and works to ensure financial stability and economic growth.

Information Booster:

(a) SBI (State Bank of India)

• History: Established in 1806 as Bank of Calcutta, renamed SBI in 1955 after merging with several banks.

• Function: Commercial bank providing services like savings, loans, and investments.

• Monetary Policy: Follows RBI’s monetary policy but does not formulate or implement it.

(b) CAG (Comptroller and Auditor General of India)

• History: Established in 1858; became CAG after India’s Constitution in 1950.

• Function: Audits government accounts for financial transparency.

• Monetary Policy: Does not play a role in monetary policy; focuses on auditing government expenditure.

(c) RBI (Reserve Bank of India)

• History: Established in 1935; became state-owned post-independence.

• Function: Manages monetary policy, currency, inflation, and banking regulations.

• Monetary Policy: Formulates and implements monetary policy, adjusting interest rates and managing liquidity.

(d) SEBI (Securities and Exchange Board of India)

• History: Established in 1988, became statutory in 1992.

• Function: Regulates the securities market, ensuring fair and transparent operations.

• Monetary Policy: Does not formulate monetary policy; focuses on market regulation and investor protection.