Monetary Economics

Monetary forces operate through myriad of channels- market and non-market, institutional and others. The study of financial institutions, instruments, and markets is, therefore, of the first importance to understand the working of monetary forces, to analyse their effects, to plan policy measures and evaluate their consequences. This gains in further importance, because these institutions are peculiar to each country; they are the products of its history, traditions, the genius of its people and the government; they also change over time. In India, much has happend on this front over the short span of 34 years after it became free of the foreign rule. Compressing of all the major developments in a systematic framework and bringing out their implications for the working of the economy and monetary and credit policies is the task attempted in this Part of the book under ten chapters (1-10).

The first three chapters discuss money, credit, financial system, financial intermediaries, and financial markets and instruments in general terms and as they are found in India. A detailed discussion of the banking system of India is offered in the next four chapters (4-7), beginning with a study of the functions and promotional role of the Reserve Bank of India (Chapter 4), going on to commercial banks in the next two chapters and to co-operative banks in Chapter 7. In each of these fields of banking, several important structural and policy developments have taken place. These developments repre- sent in concrete terms institutional response to complex problems of finance, which mere theorising cannot easily envisage or even comprehend.

Development banks are specialized institutions for the provision of development finance and associated services to designated sectors of the Indian economy. They are studied in Chapter 8, followed by a study of several non-bank financial intermediaries operating in India in Chapter 9. Any study of the Indian financial system will be incomplete without a discussion, howsoever brief and impressionistic, of the unregulated credit markets and their functionaries. The task is attempted in the closing chapter (10) of this Part