Monetary policy of India



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What is repo rate by RBI of India? Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will h … elp banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. The rate charged by RBI for its Repo operations is 5. When RBI lends money to bankers against approved securities for meeting their day to day requirements or to fill short term gap.

It takes approved securities as securityand lends money. These types of operations are generally for overnight operations. The hike comes into effect immediately. Current repo rate in India? That would depend on the damand for the specific bond. Repo rate of rbi? TomorrowMakers Let's get smarter about money. CSR Compendium Touching lives of many. ET EnergyWorld A one stop platform that caters to the pulse of the pulsating energy.

NIFTY 50 10, Drag according to your convenience. Suggest a new Definition Proposed definitions will be considered for inclusion in the Economictimes. Regressive Tax This system of taxation generally benefits the higher sections of the society having higher incomes as they need to pay tax at lesser rates. Service Tax Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers.

Repo rate is the rate at which the central bank of a country Reserve Bank of India in case of India lends money to commercial banks in the event of any shortfall of funds.

My teammates often discuss about it and I am standing clueless in front of them, nodding my head with hands in my pocket. Sure, you can Google it instead of asking your commerce friend, but you will find Google will also give you standard statements and not a thorough understanding of it.

There are a lot of terms you have a vague idea about, but not really sure about what they exactly mean and how they affect you. The purpose of this article is to cover two such words- Repo rate and reverse repo rate. We also hear them when the policymakers justify certain economic decisions.

And we know that whenever these words are used frequently in newspapers and news channel discussions, our loan rates, deposit rates are set to change- for better or worse. Just like Raju, I will keep it super simple for you to get a hold of the concept. Suppose you are State Bank of India. You receive a proposal from a big business for a loan of Rs crore. The proposal is good, and you want to give them the loan. So what do you do, you go to your central bank- The Reserve Bank of India.

You borrow some money Rs crore from RBI in order to fulfill your short term demand. Of course , RBI will not give you this money for free. It will charge interest from you for this loan that it is going to give you. Here RBI insists on a very particular security- Government bonds. RBI enters into an agreement with the bank- that the bank will pledge the securities with RBI for the loan amount, and buy back at the future date at a pre-determined future price. The repo rate here will determine how much more will the bank SBI pay to RBI for the same security while repurchasing them in future.

In the above example, let us suppose SBI has excess liquid money. It means that the demand for loans is less, and inflow of money in the form of savings is more for the bank.

Now what will SBI do with the excess money? It can invest it somewhere, but investing in long term plans might mean less liquid options for SBI. So it parks the excess funds with RBI for short term. Again, it will not give these funds to RBI free of cost, rather charge a rate of interest. That rate of interest is the reverse repo rate.