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Monetary Management and Financial Intermediation 121

Figure 3: Broad Money Growth (YoY) Figure 4: Aggregate Deposits Growth (YoY)

14 13
12
13
11
12 10
per cent 11 per cent 9 8

10 7
6
9
5
8 4
Apr 10,20 Jun 10,20 Aug 10,20 Oct 10,20 Dec 10,20 Feb 10,21 Apr 10,21 Jun 10,21 Aug 10,21 Oct 10,21 Dec 10,21 Apr 10,20 Jun 10,20 Aug 10,20 Oct 10,20 Dec 10,20 Feb 10,21 Apr 10,21 Jun 10,21 Aug 10,21 Oct 10,21 Dec 10,21

Source: RBI

4.6 Money multiplier- measured as a ratio of M3 to M0 has been on the decline since 2017-18
(Figure 5(a)). As on 31 March 2021, money multiplier (MM) stood at 5.2 from 5.6 a year ago.
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However, money multiplier adjusted for reverse repo - analytically akin to banks’ deposits with
the central bank - turned out to be lower at 4.6 by end-March 2021. The gap between MM and
adjusted MM reflects parking of funds by banks under the reverse repo window of the RBI and
to some extent a weak credit creation process. Money multiplier, however, improved slightly to
5.3 as on 31 December 2021, while adjusted MM stands at 4.4 (Figure 5 (b)).
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Figure 5: Money Multiplier
(5a) (5b)

8
7
6
5
ratio 4
3
2
1
-
1951-52 1956-57 1961-62 1966-67 1971-72 1976-77 1981-82 1986-87 1991-92 1996-97 2001-02 2006-07 2011-12 2016-17 2021-22*

Source: RBI
Note: Money multiplier adjusted for reverse repo is based on reserve money adjusted for commercial banks’ reverse
repo deposits with RBI, *Number for 2021-22 is as of 31 December 2021 in Figure 5(a)
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