Reserve bank of India (RBI)- RBI Monetary policy rate, RBI Function and RBI Rates

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Reserve bank of India (RBI) is the central bank of India. RBI is controlled all of the monetary policy like Repo rate, Reverse Repo Rate, Bank Rate, Cash reserve ratio, Base rate, Statutory Liquidity ratio and Marginal Standing Facility. Reserve bank of India (RBI) is also control flow of money in Indian market.

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In below this article we are giving latest update related to RBI Monetary policy rate:

Name of the Monetary policy Changes
1.Bank Rate 8.5%
2.Cash Reserve Ratio (CRR) 4%
3.Statutory Liquidity Ratio (SLR) 21.5%
4.Base Rate
5.Marginal Standing Facility (MSF) 8.5%
6.Repo Rate 7.5%
7.Reverse Repo Rate 6.5%

RBI Monetary police knowledge in Brief:

List of RBI Monetary Policy:

  • Bank Rate
  • Base Rate
  • Repo Rate
  • Cash reserve Ratio
  • Reverse Repo Rate
  • Statutory Liquidity ratio (SLR)
  • Marginal Standing facility (MSF)

1.Bank rate:

What is bank Rate?-

  • Definition of bank rate is at which Reserve bank of India Lends money to other finance institution or other bank.
  • Bank rate is most important tool for Central bank of India, Which reserve bank of India (RBI) uses for Short Term motive.
  • In other way you can also say, any upward revision in bank rate by RBI is indication that common bank is also increase deposit rate as well as base rate.
  • The bank rate can also indicate an increase and decrease in based your EMI.

Are you confusing? Leave it check simple definition of Bank Rate in below:

Bank Rate:

  • Bank Rate is at which Central bank of India (RBI) lends finance to other bank or any financial institution.
  • If any case bank rate increases then long term interest rate also tend to move-up and vice-versa.

2.Base Rate:

What is base Rate?-

  • Base rate at which financial institution, base rate is the minimum rate below which bank cannot lend money to central bank of India, Expect in case permitted by Central bank of India.
  • Bank rate is the Minimum rate of interest that bank is permitted to charge from its customer.

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3.Repo Rate:

What is Repo rate?-

  • The Rate is at which the Central bank of India lends money to financial institution or other commercial bank with securities.
  • Repo Rate is also known as repurchase agreement.
  • Repo rate is basically used by monetary authorities to control inflation.
  • The main Effect of Repo rate increase and decrease, when repo rate goes up borrowing from Central bank become more expensive.
  • So here we can see that in case Increasing repo rate RBI, it more expensive for the bank borrow money and decreases repo rate, its exactly reverse way cheaper for banks to borrow money.

4.Reverse Repo rate:

What is Reverse Repo rate?:

  • Reverse Repo rate is exactly opposite of repo rate
  • Reverse Repo rate is at which the reserve bank of India (RBI) borrows fund from any financial institution or other commercial bank for short time duration.
  • The Commercial bank deposits their short term excess fund with the RBI and also earns it.
  • The main function of Reverse repo rate is used by the RBI to absorb liquidity from the economy.
  • Reverse repo rate is increasing, which it means that bank earn higher rate interest from Central bank.

5. Cash Reserve Ratio:

What is Cash Reserve Ratio?:

  • Cash Reserve Ratio is shortly known as CRR.
  • The Cash Reserve Ratio is defined as a, Bank in India are required to hold certain proportion of their deposits in the form of cash.
  • The simple definition of Cash reserve ratio is the amount of funds bank must keep with the central bank.
  • Example like, Now the CRR is at 4 percent, which means for every 100 rupee, the commercial bank keeps 4 rupee with the central bank in cash.
  • The CRR is indicate the policy stance of the bank and also used as a tools to manage liquidity.

6.Statutory Liquidity ratio (SLR):

What is SLR?:

  • SLR full form is Statutory Liquidity Ratio.
  • The minimum Percentage of deposit that the bank has to maintain in form of gold, cash and other securities.
  • You can say also, the ratio of cash and some other approved securities to liabilities.
  • The SLR is also maintained the credit growth of India.

7.Marginal Standing Facility (MSF):

What is MSF?:

  • MSF Stands for Marginal Standing Facility.
  • MSF is the rate at which Central bank lends money overnight to scheduled banks against approved government securities.

RBI Function download here pdf –RBI Function Pdf

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