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Q17 (IAS/1997) Economy › Money, Banking & Inflation › Monetary aggregates Answer Verified

The sum of which of the following constitutes Broad Money in India ? I. Currency with the Public II. Demand deposits with banks III. Time deposits with banks IV. Other deposits with RBI Choose the correct answer using the codes given below :

Result
Your answer: —  Â·  Correct: C
Explanation

In India Broad Money (M3) is defined as M1 plus net time deposits of the banking system; M1 itself comprises currency with the public and demand deposits [1]. Additionally, RBI practice treats certain ‘other’ deposits with the Reserve Bank as part of the monetary aggregates included in M1, so these are carried into M3 as well [2]. Therefore M3 (broad money) consists of: (I) Currency with the public, (II) Demand deposits with banks, (III) Time (term) deposits with banks, and (IV) ‘Other’ deposits with the Reserve Bank — matching the four components listed in official aggregates reporting.

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
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