Q. Which of the following components constitute Narrow Money (M1) as defined by the Reserve Bank of India (RBI)?
1.Currency with the Public
2.Demand Deposits with the Banking System
3.Inter-bank Term Deposits (e.g., Call Money)
4.‘Other’ Deposits with the RBI
Select the correct answer using the code given below:
Answer: B
Notes:
Explanation:
The RBI defines the monetary aggregate M1 (Narrow Money) as:
M1=Currency with the Public+Demand Deposits with the Banking System+’Other’ Deposits with the RBI
Statement 1: Correct.
Statement 2: Correct. Demand Deposits include current account deposits and the demand liability portion of savings accounts.
Statement 3: Incorrect. Inter-bank term deposits, such as Call Money and Certificate of Deposits, are part of the broader money aggregates, not M1.
Statement 4: Correct. This includes deposits of international financial institutions, foreign central banks, etc., with the RBI.
