BANKING RATES AND

RATIOS
Different rates and ratios prevailing in economy and their meaning
 WHAT ARE THE DIFFERENT
• Cash reserve ratio
RATES
(CRR)
• Statutory liquidity Ratio (SLR)
• Repo Rate (RR)
• Reverse Repo Rate (RRR)
• Base Rate
• Bank Rate
• Marginal Standing Facility (MSF)
 CASH RESERVE RATIO
• IT IS THE PART OF THE TOTAL DEPOSITS
• WHICH THE COMMERCIAL BANKS ARE
REQUIRED
• TO KEEP WITH THE RBI
• IN THE FORM OF CASH
• RBI uses CRR to restrict or increase the money supply
in the economy.
 STATUTORY LIQUIDITY RATIO
• THE PART OF THE TOTAL DEPOSITS
• WHICH ARE TO BE INVESTED IN

• CENTRAL AND STATE GOVERNMENT BONDS AND

SECURITIES
• AS DIRECTED BY THE RBI
• COMMERCIAL BANKS EARN SOME INTEREST ON
THEM TOO.
 CRR AND SLR
Banks cannot use the money blocked in CRR and SLR for making loans or other
high interest options. Which puts them in a certain pressure.

• RBI USES CRR AND SLR

• TO REGULATE THE MONEY SUPPLY IN THE ECONOMY
• AND
• TO ENSURE THE SAFETY OF THE PUBLIC FUNDS
• KEPT WITH THE BANK
 REPO RATE
• Sometimes, commercial banks fall short of money
• And they need short term loans on immediate basis
• In such case, RBI provides them the short term credit
• Against some securities
• It is decided already that when will banks take back their
securities.
• RBI charges some interest on such loans
• The rate at which this interest is charged is known as the
Repo Rate.
• A decrease in Repo rate results in Commercial banks
• Asking for more credit
• Resulting in increase in Money Supply
• Thus boosting the economy
• And vice versa
 REVERSE REPO RATE
• RRR is the rate at which the RBI borrows
• From the commercial banks
• When the RRR is higher from the prevailing interest
rates in the market
• Banks will prefer to invest their money with the RBI
• Rather than the other investment options
• Because it offers better returns and also higher
security.