REPO RATE, REVERSE REPO RATE, MARGINAL STANDING FACILITY RATE, BANK RATE

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Topic- Indian economy , growth, development.

 mains paper  - GS 3

Repo Rate

The rate at which Reserve bank of India lands/ gives money to to banks. It is currently is 4%. The RBI in 1992 introduced repo. Repo allows banks and financial institutions to borrow money from the RBI for short-term ( by selling government securities to the RBI).

Reverse Repo Rate

The rate at which RBI borrowed money from banks. It is currently 3.35%. Reverse Repo rate is always less than Repo rate. The RBI in 1996 introduced reverse repo. In it RBI is borrowing money from banks  and other financial institutions. Remain unchanged in October bimonthly monetary policy.

Marginal Standing Facility Rate

The rate at which banks can borrow additional money. It is currently at 4.25%. It is always higher than Repo rate.

Bank Rate

The interest rate which the RBI charges on its long term lendings is termed as Bank Rate. Borrowers are government, financial institutions etcetera.

The rate at which the RBI buys bills of exchange. It is currently 4.25%.

Note : Monetary policy committee decides monetary policy at the end of every second months  to maintain the inflation level to sustain growth.

Note- RBI in April 2014 announced to introduce terms repo and reverse repo while announcing the first Bi-monthly credit & monetary Policy 2014-15.

Cash Reserve Ratio (CRR)

Scheduled commercial banka are required to maintain a part of its total deposited money in cash with RBI as Cash Reserve Ratio. The RBI can fix it between 0 to 4.5 percent of the ' net demand and time liabilities' ( NDTL) of the banks. On CRR, the RBI lends interest. This money is deposited the banks with RBI. 

Statutory Liquidity Ratio (SLR)

All commercial banks in India are required to maintain a part of its total deposited money with themselves in non-cash form (i.e., liquid assets).

    • This Ratio are fixed upto 40 percent of NDTL.
    • The banks can only invest this money in government securities.
    • The banks cannot invest in liquid assets of their own choice. 



GDP Growth

First Quarter (Q1) from April to June

The growth of GDP is 20.1% in the first quarter of the financial year of 2021-22 on low base on last years.

  • The main components of GDP are the private consumption ( spending on household on goods and services), government consumption ( spending by govt. on goods and services), fixed capital formation such as construction and machinery, and net export( exports minus imports).

 

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Financial inclusion index 


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