Tag: What is Repo Rate?

Bank Related Rates

TypeNameRate
Policy RateBank Rate6%
Repo Rate8.50%
Reverse Repo Rate7.50%
Marginal Standing Facility Rate9.50%
Reserve RatiosCRR6%
SLR24%
Lending Deposit RatesBase Rate9.50% – 10.75%
Savings Bank Rate4%
Deposit Rate8.50% – 9.50%

 

Explanation of Bank Related Rates

1) What is Bank Rate?
Bank rate is the rate of interest which RBI charges on the loans and advances that it extends to banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply.

2) What is Repo Rate?
The rate at which the RBI lends money to commercial banks is called repo rate, a short term for repurchase agreement. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.

3) What is Reverse Repo Rate?
The rate at which banks park their money with Reserve Bank is called the reverse repo rate.

4) What is Marginal Standing Facility (MSF) Rate?
The Marginal Standing Facility (MSF) Scheme is operational on the lines of the existing Liquidity Adjustment Facility – Repo Scheme (LAF – Repo) i.e. commercial banks can borrow money from RBI. The basic difference between Repo and MSF scheme is that in MSF banks can use the securities under SLR to get loans from RBI and hence MSF rate is 1% more than repo rate. Read more about MSF here

5) What is CRR?
Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI.

6) What is SLR?
Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities.