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DEFINITION OF MONEY ACCORDING TO THE RESERVE BANK OF INDIA

DEFINITION OF MONEY ACCORDING TO THE RESERVE BANK OF INDIA

 

Key Words We Learnt So Far

  • Double Coincidence of Wants: When both the parties have to agree to sell and buy each other’s commodities. This is known as the double coincidence of wants.
  • Medium of Exchange: Money acts as an intermediate in the exchange processes, it is known as the medium of exchange.
  • Currency: Modern forms of money include currency – paper notes and coins.
  • Deposits: A sum of money paid into a bank.

Reserve money (m0):- currency in circulation+ deposits of commercial banks in rbi-loans granted by rbi to the govt. + assests of the rbi abroad – it is the most liquid state of money where in the assests could be readily converted into money.
(m1):- m0 + the amount of money deposited by the customers in differnt banks in differnt acccounts viz., saving, current recurring, time deposits etc.
(m2):- m1 + amount of money deposited by the customer in the post office in postal accounts subject to the maximum limits of rs.100,000.
(m3):- m1 +all types of the term deposits +govt. bonds, shares debentures, securities etc.
(m4):- m3 +all sorts of saving accounts in the post office except national saving certificates

Different countries different currencies

  •  USA – dollar
  • Britain – Pound Sterling
  • Canada – Canadian dollar
  • Singapore – Singapore dollar
  • China – Chinese Yuan renminbi
  • Japan – Japanese yen
  • Australia – Australian dolla
  • Sri Lanka – Sri Lankan rupee

Deposits money in Banks

  • People need only some currency for their day-to-day needs.
  • People deposit the extra money with the banks by opening a bank account in their name.
  • Banks accept the deposits and also pay an interest rate on the deposits.
  • In this way people’s money is safe with the banks and it earns an interest.
  • People also have the provision to withdraw the money as and when they require.
  • Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.

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