The reserve bank of india employs various monetary policy to control the inflation. Interest rates are fixed at a relatively high percentage so the borrowing by government, financial institutions and commercial banks are regulated and used efficiently. RBI exchanges foreign currency reserve ( RBI receives foreign currency during exports which it uses to import goods) to stabilize country’s currency stability. In other words, RBI employes higher rates of interest to reduce borrowing and to promote wise lending by banks and exchanges foreign exchange reserves during trade. It maintains liquidity in country by ensuring  necessary supply of money. RBI designs and supervises financial institutions to prevent excessive risk taking.