Components of Money Supply

    Components of Money Supply  
M1 Consists of currency with the public (ie notes & coins in circulation minus cash with the banks)
  plus demand deposits with the bank (deposits which can be withdrawn without notice) plus
  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
  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
  Borrowing by FIs+ Certificates of Deposit issued by FIs; and
L3 L2 + Public Deposits of Non-Banking Financial Companies

 

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