Repo RateRepo rate or repurchase rate is the rate at which banks borrow money from the central bank (RBI forIndia) for a short period by selling their securities (financial assets) to the central bank with anagreement to repurchase it at a future date at predetermined price. It is similar to borrowing moneyfrom a money-lender by selling him something, and later buying it back at a pre-fixed price.Bank RatePeople often get confused between Bank Rate and Repo Rate. Though they appear similar there is afundamental difference between them.Unlike Repo Rate, there is no sale of security in Bank Rate. Bank rate is the rate at which banks borrowmoney from the central bank without any sale of securities. It is generally for a longer period of time.This is similar to borrowing money from someone and paying interest on that amount.Both these rates are determined by the central bank of the country based on the demand and supply ofmoney in the economy.Reverse Repo RateReverse Repo rate is the rate of interest at which the central bank (RBI) borrows funds from other banksfor a short duration. The banks deposit their short term excess funds with the central bank and earninterest on it.Reverse Repo Rate is used by the central bank to absorb liquidity from the economy. When it feels thatthere is too much money floating in the market, it increases the reverse repo rate, which means thatbanks earn higher rate of interest when they deposit money with the central bank.Reverse Report rate was an independent rate till 03/05/2011. However, in the monetary policyannounced on 03/05/2011, RBI decided to link it to Repo rate. So, Reverse Repo Rate is now always 100bps below the Repo rate (till RBI decides to delink the same).CRR (Cash Reserve Ratio)Have you ever wondered what happens to the amount that you deposit in bank? It is used by banks toearn money by investing or lending it to others (house loans, personal loans etc.). But as per theregulations, banks cannot use the entire amount deposited with them for this purpose. They arerequired to maintain a percentage of their deposits as cash.So if you deposit Rs. 100/- in your bank, then bank cant use the entire Rs. 100/- for lending orinvestment purpose. They have to maintain a portion of the deposit as cash and can use only theremaining amount for lending/investment. This minimum percentage, which is determined by thecentral bank, is known as Cash Reserve Ratio.

So if CRR is 6% then it means for every Rs. 100/- deposited in the bank, it has to maintain a minimum ofRs. 6/- as cash. However, banks do not keep this cash with them, but are required to deposit it with thecentral bank, so that it can help them with cash at the time of need.

SLR (Statutory Liquidity Ratio)Apart from keeping a portion of deposits with the RBI as cash, banks are also required to maintain aminimum percentage of deposits with them at the end of every business day, in the form of gold, cash,government bonds or other approved securities. This minimum percentage is called Statutory LiquidityRatio.ExampleIf you deposit Rs. 100/- in a bank, and assuming CRR to be 6% and SLR to be 8%, the bank can use 100-6-8= Rs. 86/- for giving loan or for investment purpose.How Is A Layman Impacted By These Rates?Having understood the meaning of these banking terms, let us now see how we are affected byincrease/decrease of these rates.The central bank uses these rates to control inflation.All About InflationInflation and Types of InflationRepo Rate & Bank RateBanks earn profit by borrowing at a lower rate of interest from the central bank, and lending the sameamount at a higher rate to the customers. If the repo rate or the bank rate is increased, bank has to paymore interest to the central bank. So in order to make a profit, banks in turn increase the interest rate atwhich they lend money to the customer. This dissuades the customers in taking credit from banks,leading to a shortage of money in the economy and less liquidity, thereby controlling inflation.Reverse Repo RateAn increase in Reverse repo rate means that the central bank now pays more interest to the banks fordepositing their money with it. This results in banks transferring more funds to the central bank to earnattractive interest. As a consequence, money is drawn out of the banking system, leading to a shortageof money in the economy and less liquidity, thereby controlling inflation.By lowering repo rate, central bank injects liquidity in the banking system and by increasing reverse reporate it absorbs liquidity from the banking system.

CRR & SLRIncrease in SLR and CRR rate means that banks will have less power to give loans, which again controlsamount of money floating in the market; thereby controlling inflation. It also makes banks safer to keepmoney because banks will have a higher liquidity to meet the demand of customers. As we learnt fromthe recession, giving loans expose banks to great risks. So if banks have lesser funds to give as loan, theybecome relatively safer.

? ? ?

,

---- , ,

----, , ,

----- , ,

,

--- , - ( )

: +

:

( ), , , ,

, ( , ) , :

lax ( , , )

ALL ( ) - Astunia, Latubia,Lithuania

4S - Spain, Sypras, Slovenia,SlovekiaLand 3- Finland, Iyrland, Netherland2nd World War( 1 Sep,1939 - 2 Sep,1945) - Jermany, France, Italy, Beljium,Austria, GreaceTotal 19 (From EU members)EU

, , , , , ( )

:

:

: () -

, ,

: () ( - , - , - )

() -

() - ( )

:

- , ,

- - , - , ( )

: ( ) , USA ( , - )

( , - ( )

- ( BB) - - - - - - - - - - - , , , , , , ,

:

,

, , , , , ,

:

, , , -