2018 · Q108
The Reserve Bank of India defines narrow money as
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- ACU (currency notes + coins) + DD (net demand deposits held by commercial banks)
- BCU + DD + saving deposits with post office savings banks
- CCU + DD + net time deposits of commercial banks
- DCU + DD + net time deposits of commercial banks + total deposits of post offices
Explanation
The RBI's narrow money (M1) is currency with the public — notes plus coins (CU) — plus net demand deposits of commercial banks (DD). Savings deposits with post offices enter M2, and time deposits enter M3 (broad money). Hence narrow money is CU + DD only.