Question

State the various components of money supply used by the Reserve Bank of India.

Answer 1

The Reserve Bank of India classifies money supply into four categories, which are defined as follows:

• M₁ comprises the currency held by the public, demand deposits in commercial banks, and other deposits with the Reserve Bank of India.
• M₂ includes all components of M₁ along with savings deposits in post office savings banks.
• M₃ consists of M₁ plus time deposits in commercial banks.
• M₄ includes M₃ along with total deposits in the post office savings system, excluding National Savings Certificates.