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What is the meaning of: CRR (Cash Reserve Ratio), repo rate, reverse repo rate, Bank rate, SLR ( Satutory Lqidity Ratio). Effect of increase in the same.  

Asked in Exams, Education & References at 11:00 PM on August 21, 2008

Tags: crr cash reserve ratio repo rate

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Murtuza
Murtuza
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Hai Murtuza .,

the definitions of Ananth are correct.,

W.r.t the increase ....

As well knws CRR and SLR are the ratios which define the gamut of funds which are available with a particular bank at particular point of time.
The bank should maintain its CRR and SLR at evry point of time in its operations.

An increase in the standards of CRR / SLR will force the Banking co's to appropriate such excress reserve requirements into its chest, thereby INCREASING THE IDLE FUNDS of the banks. If there is not such increase in the rate , those funds mite hve been invested in some profitable areas for some return(either for interest/dividend) , so due to the increase in the CRR / SLR rate the return of income on such funds is lost therby effecting the TOTAL INCOME and PROFITS of the bank. To suare off this bank tries to increase the Interest rate on the loans granted to public. Due to this customers will surely think twise or thrice bfore opting a loan and thereby economy is controlled from excess boom.

hope this hs helped u
Bye
TinKu

Answered by Ravi Kiran at 9:24 PM on August 22, 2008

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Ravi Kiran
Ravi Kiran

well murtuza
here are all the defination yu want :

CRR : The CASHreserve requirement (or required reserve ratio) is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank.

The reserve ratio is sometimes used as a tool in monetary policy, influencing the country's economy, borrowing, and interest rates.[2] Western central banks rarely alter the reserve requirements because it would cause immediate liquidity problems for banks with low excess reserves; they prefer to use open market operations to implement their monetary policy. The People's Bank of China does use changes in reserve requirements as an inflation-fighting tool,

REPORATE : The repo rate is the relevant interest rate for many arbitrageurs operating in the futures market. It is derived from a repurchase agreement where securities owned by one party are sold to a second party at one price and then repurchased by the first party after a short period of time at a slightly higher price (the second party is essentially providing the first party with a loan). The difference in prices is the interest earned by the second party and the annualized rate of this amount is called the repo rate. The most common type of repo rate is the overnight repo rate where the rate is renegotiated every day. Longer-term agreements called term repos also exist. The repo rate is used for discounting purposes in the binomial method.

SLR : Statutory Liquidity Ratio (SLR) is a term used in the regulation of banking in India. It is the amount which a bank has to maintain in the form of cash, gold or approved securities. The quantum is specified as some percentage of the total demand and time liabilities ( i.e. the liabilities of the bank which are payable on demand anytime, and those liabilities which are accruing in one months time due to maturity) of a bank. This percentage is fixed by the Reserve Bank of India. The maximum and minimum limits for the SLR are 40% and 25% respectively.


ALL THE BEST MURTUZA

Answered by ANANT- at 7:04 AM on August 22, 2008

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ANANT-
ANANT-

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