Money Supply Measures — Policy Reforms

Entry	Year	Description	Impact
Reserve Bank of India (Amendment) Act, 2016	2016	This amendment formally established the Monetary Policy Committee (MPC) and provided a statutory basis for the inflation targeting framework. It mandated the RBI to achieve a specific inflation target (currently 4% with a band of +/- 2%).	While not directly amending the definition of money supply measures, this amendment fundamentally changed how money supply is managed. By shifting to an inflation-targeting framework, the RBI's focus moved from directly targeting monetary aggregates (like M3) to using interest rates as the primary policy instrument to achieve the inflation target. However, money supply measures remain crucial indicators for the MPC to assess liquidity conditions and forecast inflation, influencing their interest rate decisions. It represents a significant evolution in India's monetary policy strategy.
Banking Regulation (Amendment) Act, 2020	2020	This amendment brought cooperative banks under the direct supervision of the Reserve Bank of India, extending many provisions of the Banking Regulation Act, 1949, to them.	This amendment enhanced the RBI's regulatory oversight over a significant segment of the banking sector, particularly urban and multi-state cooperative banks. By strengthening the RBI's control over these institutions, it improved the central bank's ability to ensure financial stability and influence credit creation across a broader spectrum of deposit-taking entities. While cooperative bank deposits were already implicitly part of M1/M3, the enhanced regulation ensures better data quality and more effective transmission of monetary policy, leading to a more accurate and controllable money supply.