Analyzing Different Types Of Bank Rates - 2719 Words

MA FE- ASSIGNMENT FOR 3RD PERIODICAL ANALYZING DIFFERENT TYPES OF BANK RATES SHAONI BISWAS FE-1336 In this paper I have discussed about different types of bank rates prevails in Indian banking system, their history and impact on economy if changed. INTRODUCTION The monetary policy represents policies, objectives and instruments directed towards regulating money supply and the cost and availability of credit in the economy. In the monetary policy framework, broad objectives are prescribed. The three major objectives of economic policy in India have been †¢ Growth †¢ Price stability †¢ Social justice To achieve these, the key instruments of RBI as well as†¦show more content†¦Ã¢â‚¬ ¢ Earlier there was a floor of 3% and ceiling of 20% on CRR imposed by RBI but after 2006 there is no restriction on the maximum and minimum level of CRR to be maintained. †¢ At present CRR is 4%. Utility: ï‚ž Reduces the depositor’s risk to some extent by keeping a proportion of deposits in liquid form. ï‚ž Serves is to maintain the solvency of bank ï‚ž Has direct relation with the funds available for lending with bank. ï‚ ¡ eg: if deposits are 100 and CRR is 10% then funds available for lending would be 90. When CRR increases then the funds available with bank for lending decreases due to which banks increases the interest rates to attract more deposits. But it has reverse repercussion on borrowers as higher interest rate means cost of money increases ï‚ž Used to drain out excessive money in the bank and maintain liquidity in the economy CRR is an effective tool to control inflation: ï‚ § SLR(statutory liquidity ratio) What it stands for: Statutory Liquidity Ratio (SLR) refers to the minimum ratio that