In India, the scope of monetary policy encompasses the broad areas of price stability, economic growth, financial stability and exchange rate management.

Price Stability: The (main) objective is to control inflation, so that the value of the rupee is maintained. To maintain the delicate balance between economic growth and price stability, central banks like the RBI have a policy of targeting an inflation rate of approximately 4%, +/- 2%.

Factors Affecting RBI’s Interest Rate Decisions: Strictly talking in Indian context, there are a few factors that affect RBI’s interest decisions. When interest rates are low, borrowing and spending become cheaper, while high-interest rates can cool the economy and prevent excessive demand and inflation.

Balance Checking: RBI serves as a check and balance in the financial system by monitoring and regulating the activities of banks and other financial institutions. This is also concerned with imposing capital adequacy standards, conducting stress tests to determine the heat with standability of financial institutions.

Exchange Rate Management: The RBI intervenes in the foreign exchange market to maintain the exchange rate within reasonable limits. This ensures competitiveness of Indian exports and protection against external shocks.

Factors of Monetary Policy: The RBI employs different instruments for monetary policy implementation, such as repo rate, reverse repo rate, CRR, and SLR. The repo rate, or the rate at which the RBI lends to commercial banks, is the primary tool to regulate short-term interest rates and ensure the availability of credit. CRR is the portion of deposits that banks must hold with them as reserve; changes in it impact the liquidity in the banking system. The SLR, which requires banks to hold a specified amount of their net demand and time liabilities in liquid form, also affects credit availability.

Through such mechanisms, the RBI works towards creating a favorable and stable financial scenario in the economy, which spells into maneuver the larger objectives of the Indian economy.