Who controls the supply of money and bank credit?

The Reserve Bank of India (RBI) controls the supply of money and bank credit. Government securities are purchased and sold in the open market by the RBI to control money supply. This is known as open market operations. You can read about The Reserve Bank of India: Functions and Composition in the given link. 

RBI will sell Government securities to curb liquidity in the market and purchase Government securities to infuse liquidity into the monetary system.

Further readings:

  1. Non Performing Assets (NPA) – Facts for UPSC GS-III
  2. Monetary Policy – Objectives, Roles and Instruments

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