Money stock in India
In 1979, RBI classified money stock in India into 4 categories:
M1 = coins and currency notes with public + demand deposits of the public
M1 is often referred to as narrow money as it excludes the time deposits of public with banks.
M2= M1 + post office saving deposits
M3 is also known as broad money as it includes the time deposits of public with banks
M4 = M3 + total post office deposits
The concepts of M2 and M4 do not have much significance.
The third RBI working group (1998) redefined its parameters for measuring money supply and introduced new monetary aggregates (NM).
NM1 = currency + demand deposits + other deposits with RBI
NM2 = M1 + time liabilities portion of savings deposits with banks + certificate of deposits issued by banks + term deposits maturing within a year excluding FCNR (B) deposits
NM3 = M2 + term deposits with banks with maturity over one year + call / term borrowings of the banking system
M4 has been excluded from monetary aggregates.
Three liquidity aggregates L1, L2, L3 have also been introduced.