M1 is the transaction money as it can used directly for making transactions,is very liquid and can be used as a medium of exchange.
It includes deposits held by RBI on behalf of foreign banks and governments,public financial institutions,World Bank and IMF.
Can these deposits be used by RBI directly for making transactions????
Also are these deposits some sort of a loan extended to RBI by foreign banks??
Also it does not include deposits of Indian Government and Commercial banks with RBI.
So does this mean that deposits of Indian Government and Commercial banks with RBI can not be used for making transactions???
In short, the other deposits held with RBI are a part of M1, so does this mean that these deposits can be used by RBI for making transactions????
Dear student,
Other deposits includes deposits of various institutions held by the RBI. These deposits are not used by RBI itself. Rather the institutions whose deposits are with the RBI use them for transaction purposes.
M1 is called the transaction money because it represents the most liquid form of money.
Other deposits includes deposits of various institutions held by the RBI. These deposits are not used by RBI itself. Rather the institutions whose deposits are with the RBI use them for transaction purposes.
M1 is called the transaction money because it represents the most liquid form of money.