Home Business & Finance banking What is Repo Rate , Reverce Repo Rate And CRR

What is Repo Rate , Reverce Repo Rate And CRR


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 .

repo-rate ,CRR and reserve repo rate
repo-rate ,CRR and reserve repo rate

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 .