Latest Bank Rate, Repo Rate with Definition


 

  1. No
Rates /ReserveRatios % W.e.f
1 Bank Rate 9  % 28th January 2014
2 Repo Rate 8% 28th January 2014
3 Reverse Repo Rate 7% 28th January 2014
4 Cash Reserve Ratio(CRR) 4.00% 29th October 2013
5 Statutory Liquidity Ratio (SLR) 22.50% 3rd June 2014
6 Marginal Standing Facility(MSF) 9% 28th January 2014

Definition

What is Repo Rate

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.

Difference Between Repo Rate and Reverse Repo Rate

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.

What is CRR

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.

What is SLR

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 any time demand. SLR is used to control inflation and propel growth. Through SLR rate tuning the money supply in the system can be controlled efficiently.

What is Marginal Standing Facility(MSF)

Marginal Standing Facility (MSF) is the rate at which scheduled banks could borrow funds overnight from the Reserve Bank of India(RBI) against approved government securities. The basic difference between Repo and MSF scheme is that in MSF banks can use the securities under SLR to get loans from RBI and hence MSF rate is 1% more than repo rate.

What is 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.

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