FYI: Current RBI Policy & Reserve Rates *********************************** 1. Repo Rate – 7.50% 2. Reverse Repo– 6.50% 3. CRR – 4% 4. SLR – 23% 5. MSF– 9.00% 6. Bank Rate – 9.00% 1. Repo Rate : Whenever the banks have any shortage of funds they can borrow it form RBI. Repo rate is the rate at which commercial banks borrows rupees from RBI. A reduction in the repo rate will help banks to get money at cheaper rate. When the repo rate increases borrowing form RBI becomes more expensive. 2. Reverse Repo Rate : Reverse Repo rate is the rate at which RBI borrows money from commercial banks. Banks are always happy to lend money to RBI since their money is in the safe hands with a good interest. An increase in reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. One factor which encourages an organisation to enter into reverse repo is that it earns some extra income on its otherwise idle cash. 3. CRR (Cash Reverse Ratio) : CRR is the amount of funds that the banks have to keep with RBI. If RBI increases CRR, the available amount with the banks comes down. RBI is using this method (increase of CRR), to drain out the excessive money from the banks. 4. SLR (Statutory Liquidity Ratio) : SLR is the amount a commercial banks needs to maintain in the form of cash, or gold, or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by RBI in order to control the expansion of the bank credit. 5. Marginal Standing Facility (MSF) : MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities. 6. Bank Rate : The interest rate at which at central bank lends money to commercial banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Lower bank rates can help to expand the economy, when unemployment is high, by lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign in the economy, when inflation is higher than desired.
Posted on: Thu, 17 Oct 2013 09:14:47 +0000