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Q116 (IAS/2002) Economy › Money, Banking & Inflation › Monetary aggregates Answer Verified

Consider the following: 1. Currency with the public 2. Demand deposits with banks 3. Time deposits with banks Which of these are included in Broad Money (M3) in India?

Result
Your answer: —  Â·  Correct: D
Explanation

Broad money (M3) in India is defined as M1 plus net time (term) deposits of commercial banks, and M1 itself comprises currency (notes and coins) held by the public plus net demand deposits with commercial banks. Therefore M3 includes (a) currency with the public, (b) demand (net) deposits with banks, and (c) time deposits with banks. Official/textbook definitions explicitly state M1 = CU + DD and M3 = M1 + net time deposits, confirming that all three items listed are components of M3. Only deposits of the public are included (inter-bank and banks’ own reserves are excluded), which aligns with the standard RBI aggregation [2].

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, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.10 Money Supply > p. 54
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