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The Reserve Bank has today released data on Reserve Money for the week ended April 18, 2025. Click here to download Data PDF.
Reserve Money, also known as High-Powered Money or Base Money, is the total amount of money created by the central bank (in India, the Reserve Bank of India – RBI). It forms the foundation for the money supply in the economy.
Components of Reserve Money:
- Currency in circulation – Notes and coins held by the public.
- Bankers’ deposits with RBI – Deposits that commercial banks keep with the RBI.
- Other deposits with RBI – Includes deposits from institutions like the government, foreign central banks, etc.
Formula:
Reserve Money = Currency in Circulation + Bankers’ Deposits with RBI + Other Deposits with RBI
Why is Reserve Money important?
- It is the base on which the money supply (like M1, M3) is built.
- Through the money multiplier, banks create more money by lending.
- It reflects the liquidity conditions in the economy.
- RBI uses it for implementing monetary policy and inflation control.
