In the present scenario when the industrial growth is low, do you think a cut in repo rate by the rbi would accelerate the pace of economic growth?
Answers
Hello friends.
Yes.
Repo rate is the interest rate charged by central banks from commercial bnks on its lendings.
A cut in repo rate helps the commercial banks to borrow from the central banks to increase their cash which would allow them to lend more the public or large industries.
Borrowings by industries would help them to invest more, employ more and ultimately contribute more to economic growth.
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Answer:
CRR refers to the minimum portion of the total deposits that the commercial banks has to maintain with the central bank in the form of reserves. So, unlimted amount of money supply will not be created because CRR amount is fixed that is to be kept by commercial banks. Answer 3. Repo rate refers to the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation. Cutting repo rate would have impact on the whole economy. To increase the industrial growth, increasing repo rate will not have overall impact on industrial economy. Rationing credit will have more impact on the industrial growth. (Note : Students are advised to ask different questions in different threads