{"id":28688,"date":"2018-10-24T14:19:27","date_gmt":"2018-10-24T08:49:27","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=28688"},"modified":"2018-10-24T14:19:27","modified_gmt":"2018-10-24T08:49:27","slug":"key-monetary-tools-at-the-rbis-disposal","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/key-monetary-tools-at-the-rbis-disposal\/","title":{"rendered":"Key monetary tools at the RBI\u2019s disposal"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/business\/Economy\/key-monetary-tools-at-the-rbis-disposal\/article24247243.ece\"><span style=\"font-weight: 400;\">Key monetary tools at the RBI\u2019s disposal<\/span><\/a><\/p>\n<p><b>News:<\/b><\/p>\n<ol>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Recently, the Reserve Bank of India (RBI) raised its repo rate by 25 basis points to 6.25%<\/span><\/li>\n<\/ol>\n<p><b>Important facts:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">2. Cash Reserve Ratio (CRR):<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The percentage of a bank\u2019s total deposit that need to be kept as cash with the RBI<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A high percentage means banks have less to lend or invest<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A low percentage of CRR means more money to lend or invest<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">RBI uses CRR to absorb excess liquidity or to release funds needed for economic growth.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At present, the CRR is 4%. This means, if a bank\u2019s deposits increase by Rs.100, 4%, the banks will have to keep Rs. 4 with the RBI. The bank can use only <\/span><span style=\"font-weight: 400;\">\u20b996 for investments and lending purposes.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">3. Statutory Liquidity Ratio (SLR):<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The percentage of banks\u2019 total deposits that they are needed to invest in government approved securities. Banks can earn return on these investments.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At present, the SLR is 19.5%. This implies, if a deposit of Rs.100 is made in a bank, then the bank will have to invest Rs. 19.5 in government securities<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">4. Repo rate:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It is the rate at which RBI lends money to commercial banks against securities in case commercial banks fall short of funds.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Higher the repo rate, the higher the cost of short-term money to the banks and vice versa.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">When the repo rate is lowered, banks can charge lower interest rates on the loans taken by borrowers.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">5. Reverse Repo rate:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The reverse repo rate is the rate of interest offered by RBI, when banks deposit their surplus funds with the RBI for short periods.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">At present, the reverse repo rate is 6%.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Key monetary tools at the RBI\u2019s disposal News: Recently, the Reserve Bank of India (RBI) raised its repo rate by 25 basis points to 6.25% Important facts: 2. Cash Reserve Ratio (CRR): The percentage of a bank\u2019s total deposit that need to be kept as cash with the RBI A high percentage means banks have&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/key-monetary-tools-at-the-rbis-disposal\/\">Continue reading <span class=\"screen-reader-text\">Key monetary tools at the RBI\u2019s disposal<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-28688","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704911171},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/28688","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=28688"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/28688\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=28688"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=28688"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=28688"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}