In India, the Broad Money (M3) measures money supply as the sum of:
Last updated Jun 24, 2026
Correct Answer:
Option B —
Currency with the public + Demand Deposits with banks + Other Deposits with RBI + Time Deposits with banks
Analysis of the Options
In India, the Reserve Bank of India (RBI) uses four measures of money supply ($M1$, $M2$, $M3$, and $M4$). These are categorized based on their liquidity.
Option A ($M1$): This represents Narrow Money. It includes the most liquid assets: Currency (Notes + Coins) held by the public, Demand Deposits (Savings and Current accounts), and "Other" deposits with the RBI.
Option B ($M3$): This represents Broad Money. It takes everything in $M1$ and adds Time Deposits (Fixed Deposits and Recurring Deposits) held with the banking system. It is called "Broad" because it includes money that is not immediately available for transactions but can be converted into cash in a short time.
Option C ($M2$): This is $M1$ plus Saving Deposits with Post Office savings banks.
Option D ($M4$): This is $M3$ plus total deposits with Post Office savings organizations (excluding National Savings Certificates).
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
