2.1. Definition of Monetary Policy

Monetary Policy refers to the policy measures undertaken by the government or the central bank to influence the availability, determine the size and rate of growth of the money supply in the economy.

Alternatively, some economists define monetary policy as a process of managing a nation’s money supply to achieve specific goals such as constraining the inflation, achieving higher growth rates, achieving full employment etc. Generally, all across the globe, monetary policy is announced by the central banking body of the country, for example the RBI announces it in India. The RBI has the duty to see that legitimate credit requirements are met and at the same credit is not used for unproductive and speculative purposes