Current RBI Policy & Reserve Rates

1. Repo Rate – 7.50%
2. Reverse Repo– 6.50%
3. CRR – 4%
4. SLR – 23%
5. MSF– 9.00%
6. Bank Rate – 9.00%
1. Repo Rate : Whenever the banks have any
shortage of funds
they can borrow it form RBI. Repo rate is the rate at
which
commercial banks borrows rupees from RBI. A
reduction in the
repo rate will help banks to get money at cheaper
rate. When
the repo rate increases borrowing form RBI
becomes more
expensive.
2. Reverse Repo Rate : Reverse Repo rate is the rate
at which
RBI borrows money from commercial banks. Banks
are always
happy to lend money to RBI since their money is in
the safe
hands with a good interest. An increase in reverse
repo rate can
cause the banks to transfer more funds to RBI due
to this
attractive interest rates. One factor which
encourages an
organisation to enter into reverse repo is that it
earns some
extra income on its otherwise idle cash.
3. CRR (Cash Reverse Ratio) : CRR is the amount of
funds that
the banks have to keep with RBI. If RBI increases
CRR, the
available amount with the banks comes down. RBI is
using this
method (increase of CRR), to drain out the excessive
money
from the banks.
4. SLR (Statutory Liquidity Ratio) : SLR is the amount
a
commercial banks needs to maintain in the form of
cash, or
gold, or govt. approved securities (Bonds) before
providing
credit to its customers. SLR rate is determined and
maintained
by RBI in order to control the expansion of the bank
credit.
5. Marginal Standing Facility (MSF) : MSF rate is the
rate at
which banks borrow funds overnight from the
Reserve Bank of
India (RBI) against approved government securities.
6. Bank Rate : The interest rate at which at central
bank lends
money to commercial banks. Often these loans are
very short in
duration. Managing the bank rate is a preferred
method by which
central banks can regulate the level of economic
activity. Lower
bank rates can help to expand the economy, when
unemployment is high, by lowering the cost of funds
for
borrowers. Conversely, higher bank rates help to
reign in the
economy, when inflation is higher than desired.