MEASURES OF MONEY SUPPLY\n\n\n\nMoney\nsupply refers to the stock of money in circulation in the economy at any given\npoint of time. Types of money supply can be given\nas:\n\n\n\n1. M0 (M zero) \u2013\nIt is also called Reserve Money.\n\nM0 (M zero)=\nCurrency in Circulation + Bankers' Deposits with RBI + Other deposits with RBI.\n\nmoney supply\n\n\n\n\n\n2. M1 (M one) \u2013\nIt is also called Narrow Money.\n\nM1 (M one) =\nCurrency with public + Demand deposits with the Banking system + other deposits\nwith RBI.\n\nM1 (M one) =\nCurrency with the Public + Current Deposits with the Banking System + Demand Liabilities\nPortion of Savings Deposits with the Banking System + 'Other' Deposits with The\nRBI.\n\n\n\n3. M2 (M two)\n\nM2 (M two) =\nM1 + Time Liabilities Portion of Savings Deposits with the Banking System + Certificates\nof Deposit issued by Banks + Term Deposits of residents with a contractual Maturity\nof up to and including one year with the Banking System (excluding CDs).\n\nM2 (M two) =\nCurrency with the Public + Current Deposits with the Banking System + Savings Deposits\nwith the Banking System + Certificates of Deposit issued by Banks + Term Deposits\nof residents with a contractual maturity up to and including one year with the Banking\nSystem (excluding CDs) + 'Other' Deposits with the RBI.\n\n\n\n4. M3 (M three) \u2013\nIt is also called as Broad Money.\n\nM3 (M three) =\nM2 + Term Deposits of residents with a contractual maturity of over one year\nwith the Banking System + Call\/Term borrowings from 'Non-depository' Financial\nCorporations by the Banking System.\n\n\n\n5. M4 (M four)\n\nM4 (M four) =\nM3 + All deposits with post office savings banks excluding National Saving Certificates\n(NSCs).\n\n\n\nNoteworthy:\n'Other' deposits with RBI mainly comprise:\n(i) Deposits of quasi-government and other financial Institutions including\nprimary dealers, (ii) Balances in the accounts of foreign Central banks and Governments,\n(iii) Accounts of international agencies such as International Monetary Fund\n(IMF), etc.\n\n\n\nWhile M0, M1 and M3 are widely used in India, M2 and M4\nare rarely used. The RBI introduced a new set of monetary and liquidity\naggregates as per the recommendations of the Working Group on Money Supply:\nAnalytics and Methodology of Compilation. After the submission of its report in\nJune 1998, no changes were made in the definition of M0 and M1, new monetary\naggregates NM2 and NM3 as well as liquidity aggregates L1, L2, and L3 were\nintroduced, which are explained as follows.\n\n\n\nNM1 = Currency with\nPublic + Demand Deposits with Banking System + 'Other' Deposits with RBI.\n\n\n\nNM2 = NM1 + Short\nTerm Time Deposits of Residents (including and up to the contractual maturity\nof one year).\n\n\n\nNM3 = NM2 +\nLong-term Time Deposits of Residents + Call\/Term Funding from FIs.\n\n\n\nL1 = NM3 + All\nDeposits with Post Office Savings Banks (after excluding National Savings\nCertificates).\n\n\n\nL2 = L1 +Term\ndeposits with Term Lending Institutions and Refinancing Institutions + Term\nBorrowing by FIs + Certificates of Deposit issued by FIs.\n\n\n\nL3= L2 + Public\nDeposits of Non-banking Financial Companies (NBFCs).\n\n\n\nData on M0 are published by the RBI weekly. Data for M1\nand M3 are available on fortnightly basis. Among liquidity aggregates, data on\nL1 and L2 are published on monthly basis, while for L3 data is published once\nin a quarter.