Question

Explain Repo rate, bank rate, reverse repo rate, cash reserve ratio, statutory liquidity ratio, open market operation

Answer 1

Answer:

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Explanation:

1). Repo rate : It is the rate at which central bank of a country lends money to commercial banks in the event of any shortfall of fund .

2). Bank rate : It is the interest rate at which a national's central bank lends money to domestic banks, often in the form of very short term loans .

3). Reverse repo rate : It is the rate at which central bank of a country borrows money from commercial banks within the country.

4). Cash reserve ratio: CRR is a certain minimum amount of deposit that the commercial banks have to hold as reserves with the central bank .

5). Statutory liquidity ratio: SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of a liquid cash, gold or other securities .

6). Open market operation: OMO is an activity by a central bank to give take liquidity in its currency to or from a bank or a group of banks .

Answer 2

Answer:

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Explanation:

Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

A bank rate is the interest rate at which a nation's central bank lends money to domestic banks, often in the form of very short-term loans. Managing the bank rate is a method by which central banks affect economic activity.

Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. ... Description: An increase in the reverse repo rate will decrease the money supply and vice-versa, other things remaining constant.

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

Statutory Liquidity

Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.

An open market operation is an activity by a central bank to give liquidity in its currency to a bank or a group of banks. 

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