The monetary policy of any country strives to achieve a balance between its goals of price stability and higher growth by using various monetary policy tools. In light of this, the aim of the study is to examine the monetary policy of the Reserve Bank of India for achieving these objectives using interest rate as a tool, in terms of the Taylor equation for the period 1996Q1 to 2013Q3. The Autoregressive Distributed Lag bounds testing approach to cointegration is used for studying the monetary policy behavior. The paper also broadens the Taylor equation to incorporate the fiscal and open economy parameters as factors affecting monetary policy behavior. The result suggests that the growth criterion is the most significant factor affecting the interest rate policy of the bank. It also finds inflation control and open economy volatility as important factors in the policy decision making but with lesser weightage. The fiscal parameter turns out to be insignificant. The findings suggest that monetary policy decision making is growth-enhancing.