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What are Policy Rates and Reserve Ratios as on 06 Jan 2015?

RBI lends to the commercial bank through the discount window to help the bank meet depositor’s demand and reserve requirements. The interest rate the rbi charges the banks for this purpose is called Bank Rate.

Jan 6, 2015 17:56 IST
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Bank Rate: RBI lends to the commercial bank through the discount window to help the bank meet depositor’s demand and reserve requirements. The interest rate the rbi charges the banks for this purpose is called Bank Rate.

Repo Rate: Repo rate is considered as the rate at which the central bank of a country (RBI in case of India) lends money to commercial banks in the event of any shortfall of funds.

Reverse Repo Rate: Reverse repo rate is the rate on which the central bank of a country borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.

Cash Reserve Ratio: Every commercial bank has to keep certain minimum cash reserve with RBI to needs of securing the monetary stability in the country. The Reserve Bank could prescribe CRR for scheduled bank between 3% and 20% as per the demand.

Statutory Liquidity Ratio: Apart from CRR, banks are required to maintain liquid assets in the form of gold, cash and approved securities. A higher liquidity ratio diverts and bank funds from loans and advances to investment in government and approved securities.

  • Bank Rate: 9%
  • Repo Rate: 8%
  • Reverse Repo Rate: 7%
  • Cash Reserve Ratio (CRR): 4%
  • Statutory Liquidity Ratio (SLR): 22%
  • Base Rate: 10.00/10.25 %

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