Concepts of Money Supply

Money Measures
 M1 = (i) Currency Notes And Coins With the Public +
(ii) Demand Deposits of Banks and Salary Earners’
Societies held by the Public +
(iii) ‘other deposits’ with RBI
 M2 = M1 + Saving Deposits with the Post office
Savings Bank.
 M3 = M1 + Time Deposits with Banks (excluding inter-
bank time deposits)
 M4 = M3 + Total Deposits with the Post office Savings Organisation
(excluding National Savings Certificates)
Other Deposits with RBI
 ‘Other Deposits’ with RBI = Deposits held
with RBI in Current A/c by the Central Banks
of Other Countries, Financial Institutions (FIs)
and Quasi-Financial Bodies other than Banks.
+ IMF’s Deposits other than Balances in
Account No.1
 Liabilities of RBI to the non-Bank Sector.
RESERVE MONEY (RM)
 RM = Money Supply with the Public +Banks’ Reserves,
where Banks’ Reserves = Cash in hand with Banks and Bankers’
Deposits with RBI

 RM = Currency with the Public + Demand Deposits

with Banks held by the Public + ‘Other Deposits’
with RBI (which are liabilities of RBI to the non-bank
sector) + Cash with Banks + Bankers’ Deposits
with RBI