BUSINESS ADMINISTRATION
BUSINESS POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a) Repo Rate
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b) Reverse Repo Rate
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c) CRR
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d) SLR
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Unattempted
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Detailed explanation-1: -Definition: 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. Repo rate is used by monetary authorities to control inflation.
Detailed explanation-2: -Cash Reserve Ratio (CRR) is the percentage of money, which a bank has to keep with RBI in the form of cash. Whereas, Statutory Liquidity Ratio (SLR) is the proportion of liquid assets to time and demand liabilities.
Detailed explanation-3: -The key distinction between the repo and reverse repo rates is that the repo rate earns income through lending to commercial banks, whereas the reverse repo rate earns interest on funds deposited with the Reserve Bank of India.
Detailed explanation-4: -Cash reserve ratio (CRR) is the percentage of a bank’s total deposits that it needs to maintain as liquid cash. This is an RBI requirement, and the cash reserve is kept with the RBI. A bank does not earn interest on this liquid cash maintained with the RBI and neither can it use this for investing and lending purposes.