CA Foundation · Business Economics · Money Market
In the RBI's classification of money supply, which of the following correctly defines M1 (narrow money)?
M1 equals currency with the public plus demand deposits with banks plus other deposits with the RBI. It captures the most liquid money used as a medium of exchange. Time deposits and post office savings deposits are excluded and appear only in broader aggregates.
- ACurrency with the public + demand deposits with banks + other deposits with RBICorrect
- BCurrency with the public + all time deposits with banks
- CCurrency with the public + savings deposits with Post Office Savings Banks
- DNet demand and time liabilities of the banking system
Explanation
M1 consists of currency (notes and coins) with the public, demand deposits with the banking system and other deposits with the RBI. Time deposits are excluded from M1, so the second option describes a broader aggregate. Post Office savings deposits enter only the wider measures, and NDTL is a reserve-requirement base, not a money measure.
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