19.
Currently, the banking sector in the Indian economy is facing lots of problems. The rates of
Interest that banks are paying on deposits have sharply decreased; as a result banks are able
to collect lesser amounts of deposits
Due to the policies of the Reserve Bank of India, lending rates have also decreased. The
automobile industry is also facing a lot of problems and thus they have also reduced the
prices of cars. This has encouraged people to take car loans from banks as the interest rates
on loans, along with prices of cars in the automobile sector are declining.
Due to this position of tight liquidity, The Oberoi Bank Ltd. decided to raise funds by issuing
an unsecured, short-term instrument which could be purchased by corporations, companies
and Individuals.
(a) Identify and explain the money market instrument used by The Oberoi Bank Ltd.' to raise
funds
(b) Also explain the money market instrument used by the banks to maintain Cash Reserve
Ratio
Answers
Explanation:
Indian lenders State Bank of India (SBI), Bank of India (BoI) and Bank of Baroda reduced their lending rates following the Reserve Bank of India (RBI)’s move to cut the repo rate by 75 bps on Friday.
SBI was the first to pass on the lending rate cut following RBI Governor Shaktikanta Das’s announcement. Effective April 1, external benchmark-linked lending rate will be reduced to 7.05 per cent from 7.80 per cent, and repo rate-linked lending rate to 6.65 per cent from 7.40 per cent. The country’s largest lender also cut its fixed deposits rate by 20-100 bps. Retail FD’s were lowered by 20-50 bps; whilst bulk term deposit rates by 50-100 bps.
Bank of Baroda, the second largest public sector bank in India also announced cuts following the regulator’s measures. The lender slashed the interest rate on loans for retail, personal and Micro, Small and Medium Enterprises (MSMEs) to 7.25 per cent. It also reduced the Baroda Repo Linked Lending Rate (BRLLR) by 75 basis points to 7.25 per cent; applicable as a floating rate for all personal loans and retail loans, and to MSMEs.
Bank of India also cut its Benchmark Marginal Cost of Funds Lending Rate (BMCLR) by 25 bps to 7.95 per cent; across tenors from one year to one month and by 15 bps for overnight tenor. The External Benchmark Lending Rate which is linked to RBI’s Repo rate has been reduced by 75 bps to 7.25% p.a.
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Answer:
the answer is commercial paper
b) answer is call money
Explanation:
(a) because there are talking about unsecured deposit.