Whenever somebody on tv strikes that from today repo rate will be this much increses or decreases i wonder what is this terms....& why this is so important.....so here is the ANS.......

SOMETIMES I AM  CONFUSED ABOUT SOME BANKING TERMS LIKE ...........

Repo Rate, Reverse Repo Rate, CRR Rate, SLR Rate & Bank Rate 

So here is some interesting facts about it.....

1. What is a Repo Rate ??????

A : Repo rate is the rate at which our banks borrow rupees from RBI. Whenever the banks have any shortage of funds they can borrow it from RBI. A reduction in the repo rate will help banks
to get money at a cheaper rate. When the repo rate increases, borrowing from RBI becomes more expensive.

2. What is Reverse Repo Rate ???????

A: This is exact opposite of Repo rate. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. RBI uses this tool when it feels there is too much
money floating in the banking system. Banks are always happy to lend money to RBI since their money is in 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.

 

 

3. What is CRR Rate ???????

A: Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down.
RBI is using this method (increase of CRR rate), to drain out the excessive money from the
banks.

 

4. What is SLR Rate????????

A: SLR (Statutory Liquidity Ratio) is the amount a commercial bank 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 the RBI (Reserve Bank of India) in order to control the expansion of bank credit. SLR is determined as the percentage of total demand
and percentage of time liabilities. Time Liabilities are the liabilities a commercial bank liable to pay to the customers on their anytime demand. SLR is used to control inflation and propel
growth. Through SLR rate tuning the money supply in the system can be controlled efficiently.

 

5. What is Bank Rate??????

A: Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial
intermediaries. Changes in the bank rate are often used by central banks to control the money
supply.