This is a very basic post for the kids and for the people to explain the banking terminologies. Here is a conversation between Dad and Son explaining how the bank operates,
What are the implications of CRR, SLR, Repo Rate, Reverse Repo Rate and their impact on deposit rate, loan interest rate and on inflation?
Son: I have heard recently that Mr. Rajan has reduced Repo Rate by 50 basis points and everyone is saying that this is good for the market. Loan EMI may also come down. What is this rate cut means actually? I want to understand this.
Dad: To understand this you first need to know, how does a bank function. Continue reading “How does a bank operate?”
Yesterday RBI said:
– reduce the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 per cent with immediate effect;
– reduce the minimum daily maintenance of the cash reserve ratio (CRR) from 99 per cent of the requirement to 95 per cent effective from the fortnight beginning September 21, 2013, while keeping the CRR unchanged at 4.0 per cent; and
– increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.25 per cent to 7.5 per cent with immediate effect.
You did not understand that? Neither did I. Continue reading “RBI policy On a different note”
State Bank of India chairman Pratip Chaudhuri, yet again, took on the Reserve Bank of India (RBI), saying saying CRR is a “waste” for the economy and successive interest rate cuts by central bank have failed to contain inflation.
The CEO caused a flutter in the banking community by demanding the abolition of the Cash Reserve Ratio (CRR) in SBI vs RBI round II. RBI did promptly appointed a committee to look at this issue. The reserve ratios, CRR and SLR (Statutory Liquidity Reserve), are an important feature of Indian banking regulation. Continue reading “CRR VS SLR : ROUND II RBI VS SBI”