Monetary Policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Monetary policy is the macro economic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the Government of a country to achieve macro economic objectives like inflation, consumption, growth and liquidity. The monetary policy of RBI is not merely one of credit restriction, but it has also the duty to see that legitimate credit requirements are met and at the same time credit is not used for unproductive and speculative purposes. RBI has various weapons of monetary controls by using them, it hopes to achieve its monetary policy.