Various agencies or financial industry players provides a variety of financial services. These organisations can be of varied nature such as financial consultant, financial institution, investment advisor, mutual funds, investment broking companies, stock brokers, insurance advisors, and others. Since people use to invest their funds through all these organisations, hence the stake of public at large is on risk. Therefore a strong control mechanism is required to be implemented for the safety and security of public investment and for the protection of the customers. The recent trend of the frauds in the financial sector has made it necessity that a prudential and customized system of banking is required for the sustainable growth of the economy and the perfect health of financial structure of the country. The apex Bank of any country (also known as Central Bank) is the majorly responsible for the financial stability of any country, through the management of the financial structure and money & Credit creation using the effective monetary policy in the country. India in this regard doing a fantastic job by following the BASEL II since 2009. This makes the Indian banking system at global level. The Central Bank is solely responsible for the entire financial health of the country. Bank profit is undoubtedly plays a significant role in the economy at both levels, i.e. at micro level as well as macro level. The reason being at micro level, profitability is require for the successful operation of the banking business and facing the perfect competition in the banking industry. Whereas at the macro level, a sound and strong system of Banking gives a shocker to absorb the negative shocks in economy and helps in making it stable and comfortable. This research is undertaken with the view to make a detailed analysis of the impact of the monetary policy in the profitability of the banking sector in India. The financial sector is undoubtedly majorly controlled by the Banking Sector. The major domination of the banking sector is observed in financial structure of any country. The Indian Banking system is under the close supervision and control of regulator’s. This research mainly focuses that whether the monetary policy will be able to regulate the inflation or recession in the country based on the fact that how monetary policy has reacted in the past in the down and up periods of the economy, which has impacted the profitability of the banks. The research results concludes that there has been found a significant impact of the change in monetary policy on the profitability, Interest and the inflation in the commercial Banks, except the fact that commercial banks have a greater flexibility to adjust themselves in case central bank tighten the monetary policy. The adjust their lending and deposit interest rates to reduce the impact of the change on their profitability which results due to hike in rates.

KEYWORDS: Profitability, Monetary, Basel, Performance, Flexibility, Competition, Banking, Regulator.