Repo Rate , Reverce Repo Rate and CRR are the common words you hear in all financial institutions such as banks .
What is Repo Rate
Repo Rate is interest rate . Every financial institution such as bank required money to run there operations like give loans . When bank unable to fulfill there money requirements with deposits , then bank take the funds from Central Bank of country . RBI (Reserve Bank Of India) is the central bank in india .
RBI lend the funds to other banks for fulfill their fund requirements of interest . This percentage of interest is called Repo Rate .
Reverce Repo Rate
Reverce Repo Rate is also type of interest rate . As shown from its name , it is opposit of Repo Rate . When Reserve Bank Of India required funds of their operations , it is borrowed by rbi from other banks . Reverce Repo Rate is the interest rate which is given by rbi to other banks on behalf of loan ,which is lended by RBI .
CRR – Cash Reserve Ratio
CRR is abbreviation of Cash Reserve Ratio . According to RBI guidelines each bank has to keep a certain percentage of its total deposits with RBI as cash reserves. This Amount of liquid assets such as precious metals , approved securities and cash is reserved and maintain by the bank other than the cash.
The Reserve Bank of India has been enacted a bill on 2006 . According to this bill bank needs of securing the monetary stability in the country . Reserve Bank can prescribe Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling rate.
CRR is that type of amount of RBI , Which is realesed to generate liquidity to increase growth of economy . If CRR rate is high it means finacial institutions have less funds .