This is how our monetary system works. This explains the system in USA but ours is essentially same with slight differences.
One is unlike the private Federal Reserve in US, our Reserve Bank of India was nationalized in 1949. But the all central banks including Fed co-ordinate and have a bimonthly meeting in Bank of International Settlements (BIS) in Basel Switzerland and kind of run a closed banking system and that we are told that RBI is essentially "independent" of Govt of India in policy decisions.
Also consider the fact that most of what we call money is created in the commercial banking sector and not by central banks.
This will also explain why the value of rupee constantly keeps going down.
One is unlike the private Federal Reserve in US, our Reserve Bank of India was nationalized in 1949. But the all central banks including Fed co-ordinate and have a bimonthly meeting in Bank of International Settlements (BIS) in Basel Switzerland and kind of run a closed banking system and that we are told that RBI is essentially "independent" of Govt of India in policy decisions.
Also consider the fact that most of what we call money is created in the commercial banking sector and not by central banks.
This will also explain why the value of rupee constantly keeps going down.
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