At any point of time, the money held with the public has two most liquid components ● Currency Component: This consists of all the coins and notes in the circulation ● Demand Deposit Component: Demand Deposit component is the money of the general public with the banks, which can be withdrawn by them using cheques, withdrawals and ATMs. The above two components i.e. currency component and demand deposit component of the public money is called Narrow Money and is denoted by the RBI as M1. Thus, M1 = Currency with the public + Demand Deposits of public in Banks