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Components of Money Supply |
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| M1 |
Consists of currency with the public (ie notes & coins in circulation minus cash with the banks) |
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plus demand deposits with the bank (deposits which can be withdrawn without notice) plus |
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other deposits with RBI (usually negligible). Also called narrow money |
| M2 |
M1 |
+ saving deposits + Certificate of Deposits (CDs) + term deposits maturing within a year. |
| M3 |
M2 |
+ term deposits with maturity more than a year + term borrowing of banking system. Also |
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known as broad money. |
| L1 |
M3 |
+ all Deposits with the Post Office Savings Banks (excluding National Savings Certificates) |
| L2 |
L1 + Term Deposits with Term Lending Institutions and Refinancing Institutions (FIs) + Term |
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Borrowing by FIs+ Certificates of Deposit issued by FIs; and |
| L3 |
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