Nationalised Bank Present Current Bank rate ,Cash Reserve Ratio, Base rate ,Reverse Repo Rate,Statutory liquidity Ratio :
Bank rate is :- 8.25%
Question:- what is Bank Rate ?
Answer:-Reserve Bank of India allows commercial bank to borrow money for the reserve bank of India to the extent of their eligibility for refinance at a given rate which is called as bank rate.
Question :-what is the important role of bank rate ?
Answer :- their are different types of refinance that can be availed by the commercial bank in order to fulfill their money requirement from time to time and hence it is an important financial tool for commercial bank.
Cash Reserve Ratio ( CRR ) is :- 4.00%
Question:- Cash Reserve Ratio ( CRR ) ?
Answer:- Each commercial bank has to keep a certain percentage of its total deposits with Reserve Bank of India as cash reserves. It is called Cash Reserve Ratio (CRR).
Question :-what is the important role of Cash Reserve Ratio ( CRR ) in the Indian Banking System ?
Answer:-Reserve Bank of India uses Cash Reserve Ratio as a financial tool to control the money supply in the Indian market system. When the money supply is on the higher side of current market, Reserve Bank of India acts and increase the Cash Reserve Ratio to reduce the supply of money in the Indian market and vice versa.
Base Rate :- 9.75% - 10.00%
Question:- what is Base Rate ?
Answer:- It is the minimum rate of interest that a commercial bank is allowed to charge from its lending customers except in cases allowed by Reserve Bank of India.
Question :-what is the importance of Base Rate ?
Answer :-When base rate is reduced by the Reserve Bank of India all loans linked to it become cheaper we can say if you have a home loan connected to the base rate, then your loan installment or the loan tenor will go down when vice versa.
Reverse Repo rate is :- 6.25%
Question:- what is Reverse Repo rate ?
Answer:- If commercial banks have surplus amount of money with them, they can keep the surplus money with Reserve Bank of India and can earn interest on this money so the interest on such amount is called Reverse Repo Rate.
Question :-what is the importance of Reserve Repo rate ?
Answer :-Reserve Bank of India will increase the reverse Repo rate if it wants to decrease the liquidity from the system the Banks will be tempted to put money with Reserve Bank of India rather than lending it to the customers and vice versa .
Repo rate :- 7.25%
Question:- what is Repo rate ?
Answer:- When commercial banks require short term money Reserve Bank of India will lend banks against securities held by them. Reserve Bank of India will charge interest on these loans and this rate of interest is called Repo Rate.
Question :-what is the importance of repo rate ?
Answer:-When Reserve Bank of India wants to decrease the bank lending activities in the country system, it will increase the Repo Rate and Once the Repo Rate is increased, the cost of funds to banks from Resrve Bank of India will increase and it will in turn increase the lending rates for its customers. This will reduce the lending transactions. But if the Reserve Bank of India feels to activate the need of more lending activities any time it will decrease the Repo Rate and reduce the cost of funding by the bank This will stimulates into lower rates on loans and lending will go higher.
Statutory Liquidity rate ( SLR ) :- 21.50%
Question:- Statutory Liquidity rate ( SLR ) ?
Answer:-The every Indian bank has to maintain a minimum percentage of deposit in form of cash,gold or other government approved securities at the close of every day which is called Statutory Liquidity Ratio.
Question:- what is important role of Statutory Liquidity Ratio ( SLR )?
Answer :-Its role is similar to Cash Reserve Ratio more or less and controls the money circulation in the banking system. If reserve Bank of India wants to suck the excess liquidity from the market , it will increase the SLR hence Banks have to keep the higher percentage as liquid assets and hence its power to lend the money will come down.
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