The monetary policy of the Central bank are as follows :
Open market operation – This is the process in which the
government sells its bond or securities or buys it from the market.
In order to increase money supply it buys the bonds and securities
, and it sells the bond and securities to decrease the money supply
in the market.
Cash reserve ratio – It is the ratio which each and every bank
must maintain with the reserve bank, if the ratio is less than the
banks have more money to lend and hence money supply increases,
when the ratio is high, the money supply reduces in the similar
way.
Bank rate : Bank rate is the rate at which a bank lends to its
customer, if its low than the customer will borrow money thus
increasing the money supply and vice versa.