UPSC Express

Which among the following are included in monetary base or high powered money of The Reserve Bank of India?
1. Notes in circulation with the public
2. Vault cash of Commercial banks
3. Deposits held by Government of India
4. Deposits held by commercial banks with RBI
Select the correct answer using the code given below.
A.
1, 2 and 3 only
B.
1, 2 and 4 only
C.
3 and 4 only
D.
1, 2, 3 and 4
Explanation :
High powered money or powerful money refers to that currency that has been issued by the Government and Reserve Bank of India. Some portion of this currency is kept along with the public while rest is kept as funds in Reserve Bank.High Powered Money or Monetary base is the total liability of the monetary authority of the country, which in the case of India is RBI. It consists of notes and coins in circulation with public and vault cash in commercial banks. It also consists of deposits held by the Government of India and commercial banks with RBI.
The monetary base should not be confused with the money supply which consists of the total currency circulating in the public plus the non-bank deposits with commercial banks.