BANKING AFFAIRS

Detailed explanation-1: -Repo Rate: It is the interest rate at which the central bank of a country lends money to commercial banks. The central bank in India i.e. the Reserve Bank of India (RBI) uses repo rate to regulate liquidity in the economy.

Detailed explanation-2: -Repo Rate full form is or the term ‘REPO’ stands for ‘Repurchasing Option’ Rate. It is also known as the ‘Repurchasing Agreement’. People take loans from banks in times of financial crunch and pay interest for the same. Similarly, commercial banks and financial institutions also face a shortage of funds.

Detailed explanation-3: -Bank Rate is also known as “Discount Rate”, but it is sometimes confused with the Marginal Cost of Funds Based Lending Rate, commonly referred to as MCLR, which is the minimum interest rate below which financial institutions can’t lend. Also, there is a slight difference between Bank Rate and Repo Rate.

Detailed explanation-4: -Simply put, repo rate is the rate at which the RBI lends to commercial banks by purchasing securities while bank rate is the lending rate at which commercial banks can borrow from the RBI without providing any security.

Detailed explanation-5: -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.