Obstacles In Implementation of Monetary Policy ↓
Through the monetary policy is useful inwards attaining many goals of economical policy, it is non costless from sure enough limitations. Its orbit is express yesteryear sure enough peculiarities, inwards developing countries such every bit India. Some of the of import limitations of the monetary policy are given below.
1. There be a Non-Monetized Sector
In many developing countries, in that location is an being of non-monetized economic scheme inwards large extent. People alive inwards rural areas where many of the transactions are of the barter type together with non monetary type. Similarly, due to non-monetized sector the progress of commercial banks is non upwards to the mark. This creates a major bottleneck inwards the implementation of the monetary policy.
2. Excess Non-Banking Financial Institutions (NBFI)
As the economic scheme launch itself into a higher orbit of economical growth together with development, the financial sector comes upwards amongst groovy speed. As a resultant many Non-Banking Financial Institutions (NBFIs) come upwards up. These NBFIs too render credit inwards the economy. However, the NBFIs create non come upwards nether the purview of a monetary policy together with thence nullify the outcome of a monetary policy.
3. Existence of Unorganized Financial Markets
The financial markets assistance inwards implementing the monetary policy. In many developing countries the financial markets specially the coin markets are of an unorganized nature together with inwards backward conditions. In many places people similar coin lenders, traders, together with homo of affairs actively get got business office inwards coin lending. But unfortunately they create non come upwards nether the purview of a monetary policy together with creates hurdle inwards the success of a monetary policy.
4. Higher Liquidity Hinders Monetary Policy
In speedily growing economic scheme the deposit base of operations of many commercial banks is expanded. This creates excess liquidity inwards the system. Under this circumstances fifty-fifty if the monetary policy increases the CRR or SLR, it dose non deter commercial banks from credit creation. So the being of excess liquidity due to high deposit base of operations is a hindrance inwards the agency of successful monetary policy.
5. Money Not Appearing inwards an Economy
Large percent of coin never come upwards inwards the mainstream economy. Rich people, traders, businessmen together with other people prefer to pass rather than to deposit coin inwards the bank. This shadow coin is used for buying precious metals similar gold, silver, ornaments, state together with inwards speculation. This type of lavish spending give rising to inflationary tendency inwards mainstream economic scheme together with the monetary policy fails to command it.
6. Time Lag Affects Success of Monetary Policy
The success of the monetary policy depends on timely implementation of it. However, inwards many cases unnecessary delay is institute inwards implementation of the monetary policy. Or many times timely directives are non issued yesteryear the primal bank, together with so the send upon of the monetary policy is wiped out.
7. Monetary & Fiscal Policy Lacks Coordination
In social club to achieve a maximum of the inwards a higher house objectives it is unnecessary that both the financial together with monetary policies should instruct paw inwards hand. As both these policies are prepared together with implemented yesteryear 2 dissimilar authorities, in that location is a possibility of non-coordination betwixt these 2 policies. This tin forcefulness out price the involvement of the overall economical policy.
These are major obstacles inwards implementation of monetary policy. If these factors are controlled or kept inside limit, together with so the monetary policy tin forcefulness out give expected results. Thus though the monetary policy suffers from these limitations, however it has an immense significance inwards influencing the procedure of economical growth together with development.
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