MONEY AND BANKING

MEANING OF MONEY:
Money is any good that is widely used and accepted in transactions involving the transfer of goods and
services from one person to another. Economists differentiate among three different types of money:
commodity money, fiat money, and bank money.
FUNCTIONS OF MONEY:
Money is often defined in terms of the three functions or services that it provides. Money serves as a
medium of exchange, as a store of value, and as a unit of account.
Medium of exchange:
Money's most important function is as a medium of exchange to facilitate transactions. Without money,
all transactions would have to be conducted by barter, which involves direct exchange of one good or service
for another. he difficulty with a barter system is that in order to obtain a particular good or service from a
supplier, one has to possess a good or service of e!ual value, which the supplier also desires. "n other words, in
a barter system, exchange can take place only if there is a double coincidence of wants between two transacting
parties. he likelihood of a double coincidence of wants, however, is small and makes the exchange of goods
and services rather difficult. Money effectively eliminates the double coincidence of wants problem by serving
as a medium of exchange that is accepted in all transactions, by all parties, regardless of whether they desire
each other#s goods and services.
So!e of "a#ue:
"n order to be a medium of exchange, money must hold its value over time$ that is, it must be a store of
value. "f money could not be stored for some period of time and still remain valuable in exchange, it would not
solve the double coincidence of wants problem and therefore would not be adopted as a medium of exchange.
%s a store of value, money is not uni!ue$ many other stores of value exist, such as land, works of art, and even
baseball cards and stamps. Money may not even be the best store of value because it depreciates with inflation.
&owever, money is more li!uid than most other stores of value because as a medium of exchange, it is readily
accepted everywhere. 'urthermore, money is an easily transported store of value that is available in a number of
convenient denominations.
Uni of accoun:
Money also functions as a unit of account, providing a common measure of the value of goods and
services being exchanged. (nowing the value or price of a good, in terms of money, enables both the supplier
and the purchaser of the good to make decisions about how much of the good to supply and how much of the
good to purchase.
Demand fo! mone$:
he demand for money is the desired holding of financial assets in the form of money: that is, cash or
bank deposits. he demand for money is affected by several factors, including the level of income, interest
rates, and inflation as well as uncertainty about the future. he way in which these factors affect money demand
is usually explained in terms of the three motives for demanding money: the transactions, the precautionary, and
the speculative motives.
T!an%acion% moi"e:
he transactions motive for demanding money arises from the fact that most transactions involve an
exchange of money. )ecause it is necessary to have money available for transactions, money will be demanded.
he total number of transactions made in an economy tends to increase over time as income rises. &ence, as
income or *+, rises, the transactions demand for money also rises.
&!ecauiona!$ moi"e:
,eople often demand money as a precaution against an uncertain future. -nexpected expenses, such as
medical or car repair bills, often re!uire immediate payment. he need to have money available in such
situations is referred to as the precautionary motive for demanding money.
S'ecu#ai"e moi"e:
Money, like other stores of value, is an asset. he demand for an asset depends on both its rate of return
and its opportunity cost. ypically, money holdings provide no rate of return and often depreciate in value due
to inflation. he opportunity cost of holding money is the interest rate that can be earned by lending or investing
one's money holdings. he speculative motive for demanding money arises in situations where holding money
is perceived to be less risky than the alternative of lending the money or investing it in some other asset.
Su''#$ of mone$:
he total supply of money is the circulation in a given country's economy at a given time. Economics
defines money supply as the total assets of stock that is accepted as an exchange media at a given time in an
economy.
Money supply has a standardi.ed representation with three monetary components which has been
delineated as M/, M0 and M1.
he following details their principal components
M(: he total of all physical currency, plus accounts at the central bank that can be exchanged for physical
currency.
M): he total of all physical currency part of bank reserves 2 the amount in demand accounts 34checking4 or
4current4 accounts5.
M*: M0 2 most savings accounts, money market accounts, retail money market mutual funds, and small
denomination time deposits 3certificates of deposit of under 60//,///5.
M+: M1 2 all other 7+s 3large time deposits, institutional money market mutual fund balances5, deposits of
Eurodollars and repurchase agreements.
,ha do $ou mean -$ -an./ O! define -an.0
% bank is an institution which deals with money and credit. "t refers to an individual or organi.ation
which acted as a money changer or exchanged one currency for another. "t accepts deposits from the public,
makes the funds available to those who need them and helps in the remittance of money from one place to
another.
89ne that collects money from those who have it to spare or who are saving it out of their income and
lends the money so collected to those who re!uire it:.
1C!o2he!
8)anking means the accepting for the purpose of lending or investment of deposits of money from the
public, repayable on demand or otherwise and withdrawal by che!ue, draft, order or otherwise:.
1Ban.ing 3egu#aion Ac )4546
,ha a!e he "a!iou% c#a%%ificaion% of -an.%/
he banks can be classified into various types on the basis of ownership, functions, domicile etc. he
following are the various types of banks.
Cen!a# Ban. 73BI8:
7entral bank is the bank of a country$ its main function is to issue currency known as ;)ank notes#.
his bank acts as the lender of the banking system and money market of the country by regulating money and
credit. hese banks are the bankers to the government$ they are banker#s bank and the ultimate custodian of a
nation#s foreign exchange reserves. he main aim of the central bank is not to earn profit, but to maintain price
stability and to strive for economic development with all round growth of the country. he central bank of
different countries is known by different names like <)" in "ndia, )ank of England in -.(., 'ederal <eserve
=ystem in -.=.%.., etc.
Comme!cia# -an.%:
"t is a kind of bank which promotes commercial activities by lending for various commercial activities.
hey also perform certain agency services such as collection of che!ues, dividends, interest on investment,
issue of drafts, letter of credit, traveler#s che!ue, investment advisory services etc.
Indu%!ia# -an.%:
When banks provide long > term loans to industries, they are called industrial bank or investment banks.
%s investment banks, they take part in the share capital of companies. hey may serve as catalytic agents in
mobili.ation of capital in other forms of assistance such as underwriting, guarantee etc.
Exchange -an.%:
)anks which are incorporated outside the country but doing banking business in "ndia are called
exchange banks. hey provide foreign exchange, sub?ect to the rules and regulations of the country in which
they are located. Exchange banks deal in foreign exchange and speciali.e in financing foreign trade. hey
facilitate international payments through the sale and purchase of bills of exchange and this play an important
role in promoting foreign trade.
Co1o'e!ai"e -an.%:
hey are organi.ed on co@operative principles of mutual help and assistance. "n "ndia, co@operative
credit institutions are under the co@operative society#s law. hey grant short term loans to the agriculturists for
purchase of seeds, harvesting and for other cultivation expenses. hey accept money on deposit from and make
loans to their members at a low rate of interest.
Ag!icu#u!a# Ban.%:
%gricultural banks help by providing loans to weaker sections. )ut they provide long term loans for
agricultural activities which will enable the borrower to purchase new lands, to purchase heavy agricultural
machinery, in repayment of old debts, in soil conservation and land reclamation.
COMME3CIA9 BANKS:
7ommercial banks in "ndia are controlled or owned by three different groups of organi.ations. hey are
the public sector, private sector and foreign banks. We can also display the commercial banking system in "ndia
as given below$
COMME3CIA9 BANKS
&UB9IC SECTO3 BANKS &3I:ATE SECTO3 BANKS FO3EIGN BANKS
SBI AND SUBSIDIA3IES NATIONA9ISED
)4;4 7)5 BANKS8 )4<( 7; BANKS8
&u-#ic %eco! -an.%:
%fter independence, in 0ABA the banking companies %ct was passed to regulate the working of
commercial banks in "ndia. Mr. *orwalla who headed the %ll "ndia <ural 7redit =urvey 7ommittee
recommended nationali.ation of leading commercial banks for providing more finance to agriculture.
%ccordingly, the "mperial )ank of "ndia was nationali.ed and state bank of "ndia came into existence in May,
0ACC. "n 0ADA, 0B ma?or scheduled banks were nationali.ed. %gain in 0AE/, D more banks were nationali.ed.
hus, we find 1E banks are there in the public sector. he break up is as follows, state bank of "ndia and its
subsidiaries, totaling to E and 1/ commercial banks.
&!i"ae %eco! -an.%:
he private sector banks are providing more assistance to the priority sector owing to the statutory
compulsions especially under the provisions of the )anking companies %ct. his %ct was renamed in 0ADD as
)anking <egulation %ct.
Fo!eign -an.%:
he 'oreign banks though not allowed liberally earlier, are nor being welcomed, with the adoption of
economic liberali.ation policy in our country. ,rior to 0AA/, we had only limited foreign banks operating in our
country, but now we have more number of foreign banks operating in our country.
,ha a!e he "a!iou% funcion% of comme!cia# -an.%/
he following are the various modern functions of commercial banks to promote commerce and
industrial activity in the country.
FUNCTIONS OF MODE3N COMME3CIA9 BANKS
&3IMA3Y FUNCTIONS SECONDA3Y FUNCTIONS
AGENCY SE3:ICE
GENE3A9
ACCE&TING DE&OSITS G3ANTING 9OANS UTI9ITY SE3:ICE
DISCOUNTING OF BI99S
SB A=C CU33ENT A=C FI>ED DE&OSITS A=C 3D A=C
9OANS CAS? C3EDIT O:E3 D3AFT
C9EA3 9OANS SECU3ED 9OANS
&9EDGE MO3TGAGE ?Y&OT?ICATION ASSIGNMENT
Acce'ing of de'o%i%:
Sa"ing% a=c:
=aving aFc can be opened by any person above the age of 0E and he F she has to be introduced by another
customer of the same branch. "n saving aFc, the credit balance of the customers must be sufficient enough so
that che!ue issued by the customers could be honored. % saving aFc can also be opened without a che!ue book
facility. he bank will be providing to the saving aFc holder interest on the minimum credit balance. he
interest is payable half yearly and is credited to the account of the customer.
Cu!!en a=c:
-nlike saving aFc, current aFc cannot be opened by every individual. 'or opening a current aFc, a #ee!
of in!oducion is re!uired which testify the character and conduct of a person who intend to open the current
aFc. Gormally, this type of account is held by business people who may re!uire money for various activities.
he advantage of current aFc is that the customer can draw more than his credit balance, provided he is given
overdraft facility. )anker will not pay interest for current balance of the customer. )ut any debit balance in the
current aFc will be charged interest rate on day > to > day basis.
Fixed de'o%i:
When a customer deposits certain sum of money to be kept with the banker for a fixed period, it is called
a fixed deposit aFc. he fixed deposit amount is payable on maturity only to that deposit holder in whose name
the deposit receipt stands. he deposit amount is payable along with the interest at the rate as agreed upon.
)ut a customer has the option to foreclose the deposit even before the date of maturity. "n such a case,
the customer will not be entitled to the agreed rate of interest.
3ecu!!ing de'o%i:
% stipulated amount of money is deposited every month for a fixed period, say one or two years, which
is payable at the expiry of the fixed period along with interest is called recurring deposit. he interest rate on
recurring deposits will be higher as they are calculated on a cumulative basis.
G!aning of #oan%:
C#ea! #oan%:
7lear loan is a loan granted by the banker without any security but the banker safeguards himself by
granting clear loan to salaried people on the basis of their future income. he employer of the salaried person
will deduct from the salary and pay to the banker the installment amount due on the loan. he only condition is
that the employment of the borrower should be permanent in nature.
Secu!ed #oan:
&#edge:
When loans are granted against the security of the borrower, it is a secured loan. he borrower will
hand over the security to the banker under pledge e.g., Hewel loan.
Mo!gage:
"n mortgage, the loan is granted against fixed immovable property. "f the borrower fails to repay the
loan, the mortgage property will be sold and the loan amount reali.ed.
?$'ohecaion:
&ypothecation is a kind of loan wherein the borrower is enabled to purchase a vehicle or machinery with
the help of bank loan. he document of title will have the mention of hypothecation. 'or e.g., <.7. book of
vehicle containing hypothecation. "f the borrower fails to repay the loan, the bank will take over the possession
of security and dispose the same towards the recovery of the loan.
A%%ignmen:
his is transfer of an actionable claim. "f the borrower of a bank has an insurance policy, he can transfer
the policy in favors of the bank before its maturity and obtain a loan. he bank will ad?ust the loan amount from
the policy amount when it is matures.
O"e!d!af:
his is a facility given to the cu!!en a=c ho#de!% wherein depending upon their credit worthiness, the
banker grants 9+ facilities by which the customer can draw over and above his credit balance up to a fixed
amount. 'or e.g., if a customer has <s.0/,/// in his aFc as credit balance, he may be granted an overdraft of
<s.C,/// by which he can draw up to <s.0C,///. %s and when the customer deposits money, the loan amount
will be ad?usted. he interest rate is calculated on day@to day basis and hence this interest will be cheaper for
the customers.
Ca%h c!edi:
'or the benefit of businessmen who are in need of working capital, cash credit system is arranged under
this system, the customer may be given for example, <s.0 lakh as credit from 0
st
Hanuary to I0st +ecember. "f
the customer draws <s.I/, /// in March and another <s.I/,/// in %ugust and the remaining <s.B/,/// in
+ecember, the bank will charge interest according to the period of the loan. he first <s.I/,/// will carry
interest rate for a period of 0/ months, the next <s.I/,/// will carry interest rate for a period of C months and
the last loan of <s.B/,/// will carry interest rate for a period of 0 month.
Di%couning of -i##% of exchange:
-nder this method, a holder of bills of exchange can get it discounted by the banks. "n bills of exchange, the
debtor accepts the bill drawn upon him by the creditor 3i.e., holder of the bill5 and agrees to pay the amount
mentioned on maturity. %fter making some managerial deductions in the form of commission the bank pays the
value of the bills to the holder. When the bills of, exchange mature the bank gets its payment from the party
which had accepted the bills. hus such a loan is self@li!uidating.
Agenc$ %e!"ice%:
he banker undertakes to collect che!ue, bills and pro notes for customers.
he standard instruction of customer such as payment of telephone bills, insurance premium etc., are
done.
7ollecting dividends, interest on various securities.
,urchasing and selling securities as per customer#s instruction.
-ndertaken to transfer funds from one branch to another.
+ispenses salary to employees on instruction from employer.
"ssue of credit cards, both in rural and urban areas.
Gene!a# Ui#i$ Se!"ice%:
,urchase and sells foreign exchange on permission from <)".
9n behalf of importer, the banker issues letter of credit to the exporter.
"t provides safe deposit vault in which customer can keep their valuables.
"t accepts income tax on behalf of <)".
he bank also supplies data and trade information re!uired by businessmen.
,ha a!e he 3o#e% o! Im'o!ance of comme!cia# -an.% in economic de"e#o'men/
7ommercial banks in our country play an important role in the economic development of our country.
hey are as follows$
De"e#o'men of !ade and indu%!$:
%ll economic progress in the last 1// years are so has been made on extensive trade and industriali.ation, which
could not have taken place without the use of money among countries trade is financed through bills of
exchange, which are discounted by banks. Without the use of the bank che!ue, the bank draft and the bill of
exchange, international and internal trade could not have developed and without such trade speciali.ation and
industrial development could not have taken place.
3egiona# de"e#o'men:
%nother way by which commercial banks encourage production and enhance national income is by the
transference of surplus capital from region where it is not wanted so much to those regions where it can be more
useful and efficiently employed.
Ex'an%ion of -u%ine%%:
)anks provide funds to entrepreneurs for investment under conditions of unemployment. "t will push up
production in the country. 'rom the view of an under developed economy, the expansion of bank credit,
offering more financial resources to industries, is one of the contributory causes for rapid economic
development.
Ca'ia# fo!maion:
7ommercial banks provide facilities for saving and thus encourage habits of thrift among people. % higher rate
of saving and investment i.e., therefore, what constitutes real capital formation.
"n a developing country like "ndia, banking facilities are highly inade!uate. hese banks have come to
occupy an important place in the industrial and commercial life of a nation. % developed banking organi.ation
is a necessary condition for the industrial development of a country.
De"e#o'men of ag!icu#u!e and %ma## %ca#e indu%!ie%:
he development of a country not only depends upon the industrial development but also on the
development of agriculture and small scale industries and cottage industries. %griculture contributes a si.eable
portion 3about 1CJ5 to the *+, of our country. =imilarly, small scale industries provide large employment
opportunities and goods manufactured by this sector are also exported out of "ndia. he banker caters to the
financial re!uirements of these sectors which lead to the economic progress of the country.
&!o"ide inf!a%!ucu!a# faci#iie%:
)anks can develop comprehensive infrastructural facilities in the country. "t includes social, educational, fiscal
and other aspects, whose development is essential for the economic progress of a nation.
Im'#emenaion of monea!$ 'o#ic$:
Economic development needs an appropriate monetary policy. )ut a well@developed banking system is a
necessary pre condition for the effective implementation of monetary policy. 7ontrol and regulation of credit by
the monetary authority is not possible without the active co@operation of the banking system in the country.
Ba#ancing -a#ance of !ade:
hrough properly devised banking system, the country can promote exports through easy and timely credit
facilities to exporters, !uickly obtaining money from foreign buyers of goods etc. his may help maintain the
balance of trade at favorable position.
3ESE3:E BANK OF INDIA 73BI8:
<eserve bank of "ndia is the central bank of "ndia. "t was started in 0AIB as a share holders# bank. %fter
independence the government passed the transfer of public ownership %ct by which <)" was nationali.ed on 0
st
Hanuary 0ABA. "n March 0ABA the banking company %ct was passed which gave more powers to <)" to control
and regulate the working of commercial banks.
,ha a!e he "a!iou% Funcion% 'e!fo!med -$ 3BI/
he functions of <)" can be classified under three parts. hey are traditional functions, promotional
functions and supervisory functions.
T3ADITIONA9 FUNCTIONS:
I%%ue of cu!!enc$ noe%:
<)" undertakes issue of currency and the system adopted in "ndia is the minimum reserve system.
%ll the currency notes from <s.1 to <s.0/// are issued by <)" and carry the signature of *overnor of
<)". hey are called unlimited legal tender money.
he one rupee notes and small coins are issued by the *overnment and they are called limited legal
tender. he one rupee note carries the signature of %ec!ea!$ o he mini%!$ of finance.
Ban.e! o he Go"e!nmen:
he <)" functions as a banker, agent and financial adviser to the government.
<)" acts as a banker to the government by maintaining the account of central government and also that
of state government.
"t receives deposits and makes short term advances to the government.
"t collects che!ue and drafts deposited in the government account.
"t also provided overdraft facility to both state and central government.
"t provides foreign exchange resources to the government for repaying external debt or purchasing
foreign goods or making other payments.
he public borrowing of government are done through <)".
,ayments to the government such as income tax are also accepted by <)".
"t gives advices on monetary, economic, financial and fiscal matters etc.
Ban.e!% o he -an.:
<)" acts as a banker#s bank in the following manner.
7ustodian of the cash reserve of the commercial banks. %s a custodial of cash reserve of the
commercial banks, the central bank maintains the cash reserves of the commercial banks.
Every commercial bank has to keep a certain percentage of its cash balances as deposits with the central
bank. hese cash reserves can be utili.ed by the commercial banks in times of emergency.
"t acts as the lender of the last resort.
"t also acts as a clearing agency for the claims of the commercial banks.
"n this way, the central bank acts as a friend, philosopher and guide to the commercial banks.
9ende! of he #a% !e%o!:
he commercial banks have to maintain certain percentage of their deposits with <)" which is called 7ash
<eserve <atio 37<<5. )y increasing or decreasing this percentage of 7<<, <)" allows ade!uate funds for
lending purpose by commercial banks. his fund will be extended by <)" to any commercial bank which is
facing crisis.
Cu%odia# of fo!eign exchange !e%e!"e%:
he <)" also functions as the custodian of country#s foreign exchange reserves. his function helps the <)" to
overcome the balance of payment difficulties and to maintain stability in the exchange rate. "n order to
minimi.e the fluctuations in the foreign exchange rate the central bank 3buys or sells5 foreign currencies in the
market as the value of foreign currency falls or rise.
Con!o# of c!edi:
7ontrolling credit is the most important function of the central bank. -ncontrolled credit causes economic
fluctuation in the economy. )y controlling the credit effectively the central bank establishes stability not only it
the internal price level, but also in the foreign exchange rates. =uch stability is necessary for economic growth
and smooth functioning of the economy.
Ohe! funcion%:
he <)" also performs certain other miscellaneous functions.
o maintain relation with international institutions, such as the "M', World )ank 3")<+5 etc.
"t collects various types of statistics providing information about current state of the economy.
"t conducts survey$ seminars etc, and publish reports on other matters.
"t helps in developing the banking system and banking habit in the country.
"t formulates appropriate monetary policy to deal with economic crisis in the country.
"t extends training facilities to the staff working in various banking institutions.
C3EDIT CONT3O9 MET?ODS:
,ha a!e he c!edi con!o# mehod% ado'ed -$ 3BI o con!o# c!edi c!eaed -$ comme!cia# -an.%/
When the central bank exercises control on commercial banks with the view to increase or decrease the
money supply, it is called credit control. %n excess bank credit leads to more money supply in the hands of
customer who in turn demands more consumer goods, with the result, the price level increases.
he credit control is of two types.
@uaniai"e con!o# and
@ua#iai"e con!o#
@uaniai"e c!edi con!o#:
"t consists of three weapons, which are )ank <ate, 9pen Market 9peration and Kariable 7ash <eserve
<atio.
Ban. 3ae:
"t is the rate at which the <)" rediscounts the bills presented by the commercial banks for giving loans.
Whenever the commercial banks are in need of funds they approach the central bank by presenting eligible
securities, mainly government securities. )y discounting these securities, the central bank grants loans to the
commercial banks. "t is based on this rate that the commercial banks in turn grant loans to its customers. hus,
if the bank rate is increased, the commercial banks will have to pay a higher rate of interest for their borrowings
from central bank. "n turn, commercial banks will charge higher interest rate when they grant loans to their
customers. hus, the amount of credit is controlled.
O'en Ma!.e O'e!aion:
When the central bank resorts to direct buying and selling of securities in the money market, it is called open
market operation. )y selling in the money market, the central bank tries to absorb the excess money supply
with the commercial banks, insurance companies and other financial institutions. hus, during a period of
inflation, the sale of security by central bank will encourage commercial banks to buy. "n this process, the
surplus cash with the commercial banks disappears. When the commercial banks are left with fewer amounts of
funds, they cannot lend more and thereby credit is contracted.
:a!ia-#e Ca%h 3e%e!"e 3aio 7:C338:
-nder this weapon of credit control, the 7)" prescribes the minimum percentage of cash the commercial banks
are to maintain against their funds > time and demand deposits. "f there is inflation, then the central bank will
hike the percentage of cash reserve ratio. his will leave a lesser amount of cash at the disposal of commercial
banks for lending. "f the cash reserve ratio 37<<5 is reduced, the banks will be maintaining low cash in hand
and this will enable them to give more loans. "ncreased lending by commercial banks will lead to more
economic activities.
Se#eci"e 7@ua#iai"e8 c!edi con!o#:
he selective credit control mechanism has following measures.
Ma!gin !eAui!emen%:
-nder this method, the central bank will prescribe the percentage of margin a bank should maintain while
granting loans. 'or e.g., if a borrower comes to the bank with the security consisting of a gold coin and the
market value of which is <s.0/,///. he central bank will inform the commercial bank that a margin of C/J
should be maintained. "n such a case, for the gold coin with the market value of <s. 0/,///, only <s. C,/// is
granted as loan as C/J of its value is taken as a margin. +uring inflation, the central bank will increase the
margin leaving a less amount of cash at the disposal of the borrower. his will affect their borrowing capacity
and thereby the demand for other goods. he same margin will be lowered during depression so that more
money is given as loan enabling the borrower to demand more goods.
3aioning of c!edi:
he central bank may instruct the commercial banks not to lend for undesirable and unproductive purposes and
direct credit only for productive purposes. 'or this purpose, the central bank will specifically inform the
commercial banks that they will discount only certain specific bills and will refuse to discount other bills. "n
this manner, control on bank advances is brought about.
Mo!a# %ua%ion:
"t is nothing but a re!uest made by a central bank to cooperate with the policies of central bank. he appeal of
the central bank will be accepted by the commercial bank only when a cardinal relationship exists among them.
he effectiveness of this control depends on the strength of the central bank and its influence on the commercial
banks.
Di!ec acion:
-nder this method, the central bank will inform commercial banks that they must strictly adhere to the
regulations imposed by it on commercial banks. 'ailing which$
% penal interest will be levied
<ediscounting facility to the commercial banks will be refused
%dditional credit will not be granted to such commercial backs which are found violating the
regulations.
&u-#ici$:
he central bank also uses publicity as a method of credit control. he central bank regularly publishes
the statement of their assets and liabilities$ review of credit and business conditions$ reports on their own
activities$ money market and banking conditions$ etc. 'rom the published materials, the banks and the general
public can anticipate the further changes in policies of the central bank. )ut this method is not very useful in
the less developed countries where ma?ority of the people are illiterates and do not understand the significance
of banking statistics.