The RBI on Tuesday(20-04-10) hiked short-term lending and borrowing rates(Repo and Reverse repo Rates) and the portion of money banks deposit with it by 25 basis points each, in a move aimed at controlling the double digit inflation.
The below list shows the present and increased key rates:
| Policy Rates/Reserve Ratios | Present rate | Increased rates |
| 1. Bank Rate | 6.00% | Unchanged |
| 2. Repo Rate | 5.00% | 5.25% |
| 3. Reverse Repo Rate | 3.50% | 3.75% |
| 4. Cash Reserve Ratio | 5.75% | 6.00% |
| 5. Statutory Liquid Ratio | 25.0% | unchanged |
Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the Reserve Bank of India. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks. The hike in CRR, which will come into effect from April 24.
As a result of the increase in the CRR, about Rs 12,500 crore of excess liquidity will be absorbed from the banking system.
With the RBI deciding that banks now need to increase the amount of cash they have to keep with the central bank (the cash reserves), the problem is that banks will not earn any interest on this amount.
So banks will be left with little option but to hike interest rates to make up for that loss of interest they would normally have earned had CRR been lower.
So Home loan, car loan and personal loans are likely to rise marginally that might burden for the common man.
Why RBI was forced to hike rates?
The RBI said that the Indian economy is firmly on the recovery path. Exports have been expanding since October 2009, a trend that is expected to continue.
On balance, under the assumption of a normal monsoon and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand, for policy purposes the baseline projection of real GDP growth for 2010-11 is placed at 8.0 per cent with an upside bias.(Inputs from: Rediff)
Assuring that the policy actions would not halt the recovery, the RBI pegged the FY'11 GDP growth at 8 per cent. It also pegged the wholesale inflation, which is currently hovering close to the double-digits (9.9 per cent in March), at 5.5 per cent for FY' 11.
12 comments:
varun sir can u give me all d links of ur blogs which contains BANKING TERMS ,INTERVIEW EXP, TIPS FOR INT..., DO AND DONTS OF INTERVIEW as my clerical interview is in may .it will bw very helpful to me
Hi.. Varun..
ur tips abt essay\precis writing
was much helpful..kindly put such
conts 2-3 times a week ...
also explain terms related to marketing..
bye..
tanuj:
In archive you can find all the details what you have asked.
hi varun , i am a follower of u r blog . u r doing excellent job. i need a small help. can you give me an answer to the question .
how can an electronic engineer be helpful in bank sector ?
waiting 4 u r reply
thx in advance
In no way can electronic engineer can be helpful in banking sector.!!!
You have to tell that banking sector is very strong and high growth thats why i wanted a go in banking sector.
varun , did u remove d chat ?..
& i hav a doubt..are all public sector banks are nationalized?.
Revathy:
Chat is moved to top of the page beside recruitment page.
The banks which are nationalized is said to be a Public sector bank.
Hello Varun ,
Now that RBI has increased the Policy Rates/Reserve Ratios and it will inturn pressurize the banks to charge more interests on the people . with this kind of development how can they expect the economy to get better when we have rising inflations in many sectors. Dont you think it will be more burden on aam aadmi?
dear varun at rbi website it is given CRR 5.75% ..........let me plz clear dis either it is 6 or 5.75
Amit plz verify the RBI site....!!Increase in CRR came effect from 24-04-10 i have also mentioned in the post below the table.
hello verun
i am good in math ,reasoning and gs . but iam very poor in english.i am doing hard work on vocabulary and grammer . i read english newespaper also but all is vain. pls advice me to qualify the english section of bank po exam.
hello varun
i am happy to say that i am big fan of your site, it was very useful to me like gk etc
Post a Comment