A Presentation on

Study of Govt . Moves : Change in Key Economic Rates

Presented By Raveesh Grover ( 1350 Ravneet Kaur ( 1352 ) MBA II B

Introduc tion

which influence any economy include the CRR Rate.The major economic rates. the government changes these rates in order to increase or decrease the money supply. Bank Rate and SLR .During the conditions of excess demand or deficient demand. . Repo Rate Reverse Repo Rate.

50 Date 0805 2008 1311 1994 08 04-2007 24 -03-1999 14--10-1992 06 08 Latest CRR rate 5.00% . . •It is a tool used by the RBI to control liquidity in the banking system.00 5 8 00 6.WHAT IS CRR ? •CRR Stands for Cash Reserve Ratio •CRR is the amount of Funds that the banks have to keep with RBI •If RBI decides to increase the % of CRR. the available amount with the banks comes down.   Rate 1525 1050 15.

00 9 9 6 .00 Rate 5 50 7. •When Repo Rate increases. borrowing from RBI becomes more expensive 8.00 3002---2006 11--2000-2009 29 03 2004 31 06 2000 07 1001 07 2008 Date 28-03-2002 06- Latest Repo Rate 5 .WHAT IS REPO RATE? •When the banks are having Shortages of Funds. •Repo Rate is the Rate at which banks borrow money from RBI.25 1000. 00 % . they borrow it from RBI. •Low Repo Rate means banks are getting cheaper rate loans from RBI..

•An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to the attractive interest rates. It can cause the money to be drawn out of the banking system.WHAT IS REVERSE REPO RATE? •Reverse Repo rate is the rate at which RBI borrows money from banks.7 30-10--2509-2000 2009 02 2001 2005 2002 07-2004. •Banks lend the money to RBI for safeguarding the money with good amount of interest .-07-2006 2000 02-01. .. 1250 . Latest Reverse Repo Rate Date 575000 4 25 6 00 5.26 10-10 .

. RATE 34.00 . 0 % . cash or other approved securities.25 25.00 20 00 37 32 27 50 1949 1973 EFFECTIVE DATE 20-08-1994 0804--1970 25-10--07 1985 16 1997 21 -12 06 08 24 03 1993 Latest SLR Rate 24 . •It is determined by the RBI in order to control the expansion of credit.WHAT IS SLR? •SLR stands for Statutory Liquidity Ratio •Statutary Liquidity Ratio(SLR) is percentage of deposits the bank has to maintain in form of gold.

.WHAT IS BANK RATE? •This is the rate at which central bank ( RBI )   lends money to other banks or financial institutions .term interest rates also tend to move up . long . Date 22---Oct-Jan-1900 11. •If the bank rate goes up .00 15 Jul--1951 16 Nov2000 30 Apr 1997 2 2002 3 50 8 00 6 25 1.0% .00 Bank Rate Latest Bank Rate 6.

investigated the relationship between inflation and the exchange rate in the post reform period in India.Literature Author’s Name Year Findings Review Frenkel and Taylor 2006 Bhaumik and Majumdar 2007 studied that the exchange rate affects any economy through many channels and managing the exchange rate necessarily encompasses monetary and expectation considerations. studied that India needs to cut interest rates further as two reductions in less than a month haven’t been enough to make loans affordable for companies and consumers. Bhattacharya 2008 Jalan 2008 Mitra 2008 . said that an interest rate hike was the right tool to ‘cool the economy`. observed amount of credit disbursed in an economy depends on the willingness of banks to lend and on the willingness of companies and individuals to borrow.

Scope and Objectives of the Study Need of the Study ultimately the . cost of money and credit in the economy .•This research will enable to cover the gap identified from the review of literature . • Need . •To observe and analyze the various trends prevailing in economic rates which affect the growth or decline in aggregate demand . •The need of the study has arisen to have more insight vision into the government ’ s actions to influence the availability . money supply and control of inflation or deflation .

Scope of the The Study the study scope of is limited to bjectives of the Study tudy was conducted in order to achieve the following objective tudy the impact of changing economic rates on business units . tudy the influence of changes in economic rates on interest ra ompare the economic rates of India with world market .Jalandhar city only . tudy the impact of changing economic rates on common man . tudy the effect of changing economic rates on liquidity . . tudy the impact of changing economic rates on banking sector .

DATA SOURCES Secondary sources Magazines . SAMPLING DESIGN Theoretical universe : all the Business houses of the world universe : Accessible includes all the Business houses of India Sample Size : 50 Sampling Techniques : non-probability random convenience sampling .I .ended and close-ended questions. newspapers and journals Primary sources survey through questionnaire which included both open. . RESEARCH DESIGN TOOLS OF ANALYSIS The research design for Various Statistical Tools like Tables and Bar Graphs the current research was descriptive and conclusion oriented Research Methodology II . websites.

DATA ANALYSIS AND INTERPRETATION .

STATEMENT 1: Awareness regarding the current economic crisis .

STATEMENT 2: Impact of the economic crisis on Business .

STATEMENT 3: Ranking the measures to combat recession Measures to combat recession Increase in taxes Pump Priming Increase in Public expenditure Changes in key economic rates Summated Score 109 152 144 95 Rank 2nd 4th 3rd 1st Responses are based on importance score 1 st being most important and 4 th being least important . .

STATEMENT 4: Awareness regarding the action government has taken to combat the economic crisis .

STATEMENT 5: Perception of customers regarding benefit of the rate cut by RBI .

STATEMENT 6: The extent of difficulty in getting additional bank limit .

STATEMENT 7: Reduction of interest rates by banks .

STATEMENT 8: The current interest rates are competitive as compared to World market .

STATEMENT 9: The perception of people about the current situation of the economy after the steps taken by the government .

STATEMENT 10: Prediction of growth rate of year 2009 as compared to year 2008 .

7 11.1 The changes made in economic rates were essential to 209 tackle the present economic situation. The current changes in the economic rates have had a 130 positive effect on your purchasing power. People are satisfied with the role government has played to stabilize the present economic conditions 100 . The changes in the economic rates are beneficial to the 153 business.6 11. The steps taken by the government are enough to stabilize the present economic conditions.3 11.STATEMENT 11 : Respondents agreement to 5 point likert scale Serial number Statements Summated score 11. 127 91 11.8 The current changes in the economic rates have had a 133 positive effect on your liquidity position.5 11.2 11. The changes in the economic rates are beneficial to the 131 banking sector. The common man is getting the benefits of these changes.4 11.

Maximum score=250 Average score= 150 Minimum score= 50 .

Conclusion of the Study .

•The government should also look up to some other measures like increase in taxes. . The interest rates should be lowered and the bank credit limit should be increased. •To settle down the financial crisis the rates should be further reduced .ommendations commendations of the stu •Keeping in view the benefit of all the sectors of the society government should make the changes in the economic rates. increase in public expenditure etc to stabilize the economy. • •The government should concentrate on higher credit creation through liquidity generation. pump priming.

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Queries? .

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