M4
Topic: Banking, Credit Creation and Monetary Policy · NCERT: Class 12, Ch 3 "Money and Banking"
Meaning
M4 is the widest of RBI's four measures of money supply:
M4 = M3 + total Post Office savings deposits (excluding National Savings Certificates)
M3 = M1 + net time deposits of banks.
M4 is broad money and the least liquid measure, because it includes savings that take time to turn into spendable cash. RBI's four measures, from most liquid to least liquid, are M1, M2, M3 and M4.
Example
All Post Office savings deposits, except NSCs, are added to M3 to get M4. This covers savings held with post offices in remote areas.
Don't confuse with
- M2: this adds only Post Office savings bank deposits to M1 and is narrow money. M4 adds total Post Office savings deposits (excluding NSC) to M3.
- M3: this is the most-used measure, called "aggregate monetary resources". M4 is wider but used less.
Related concepts
- Credit creation
- Bank balance sheet
- Bank reserves
- Money multiplier
- Currency deposit ratio
- Reserve deposit ratio
- Bank run
- High-powered money
- Currency in circulation
- Money supply