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Q51 (CDS-II/2023) Economy › Money, Banking & Inflation › Monetary aggregates Answer Verified

Which of the following are included in the definition of Narrow Money? 1. Currency with the public 2. Demand deposits 3. 'Other' deposits with Reserve Bank of India 4. Banker's deposits with Reserve Bank of India Select the correct answer using the code given below : (a) 1, 2 and 4 (b) 1 and 2 only (c) 1, 2 and 3 (d) 3 and 4 only

Result
Your answer: —  Â·  Correct: C
Explanation

Narrow Money, specifically the M1 aggregate, is defined by the Reserve Bank of India as the sum of three primary components: currency with the public, demand deposits with the banking system, and 'other' deposits with the RBI [2]. 'Currency with the public' includes notes and coins in circulation minus cash reserves held by banks [3]. 'Demand deposits' refer to net deposits in current and savings accounts that can be withdrawn on demand [1]. 'Other' deposits with the RBI include demand deposits from public financial institutions like NABARD, foreign central banks, and international agencies. Conversely, 'Banker's deposits with the RBI' are a component of Reserve Money (M0) or the Monetary Base, rather than Narrow Money (M1) [2]. Therefore, items 1, 2, and 3 are included in the definition, while item 4 is excluded.

Sources

  1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Legal Definitions: Narrow and Broad Money > p. 48
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > TOOLS TO MEASURE MONEY SUPPLY > p. 158
  3. [3] https://rtuassam.ac.in/online/staff/classnotes/files/1627878058.pdf
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