Answer Posted / deepika

Hai Neha,
The questions which u have asked were already discussed by
pankaj and others, i think u did not check it out, 104
questiion, do not worry i am pasting the same over here.

Repo Rate is the rate at which the RBI buys government
securities from the market to infuse liquidity in the
system.

Reverse Repo rate is the rate at which the RBI absorbs
excess bank funds by selling government securities in the
market.

Cash Reserve Ratio is the percentage of bank deposits which
are statutorily parked with the RBI as reserve.

What is Repo Rate?
Ans:- Whenever the banks have any shortage of funds they can
borrow it from RBI. Repo rate is the rate at which our banks
borrow rupees from RBI. A reduction in the repo rate will
help banks to get money at a cheaper rate. When the repo
rate increases borrowing from RBI becomes more expensive.

2. What is Cash Reverse Ratio?
Ans:- Cash reserve Ratio (CRR) is the amount of funds that
the banks have to keep with RBI. If RBI decides to increase
the percent of this, the available amount with the banks
comes down. RBI is using this method (increase of CRR rate),
to drain out the excessive money from the banks.

3. What is Reverse Repo rate?
Ans:- Reverse Repo rate is the rate at which Reserve Bank of
India (RBI) borrows money from banks. Banks are always happy
to lend money to RBI since their money are in safe hands
with a good interest. An increase in Reverse repo rate can
cause the banks to transfer more funds to RBI due to this
attractive interest rates. It can cause the money to be
drawn out of the banking system.
Due to this fine tuning of RBI using its tools of CRR, Bank
Rate, Repo Rate and Reverse Repo rate our banks adjust their
lending or investment rates for common man.

4. What is Inflation?
Ans:- Inflation is defined as an increase in the price of
bunch of Goods and services that projects the Indian
economy. An increase in inflation figures occurs when there
is an increase in the average level of prices in Goods and
services. Inflation happens when there are less Goods and
more buyers, this will result in increase in the price of
Goods, since there is more demand and less supply of the goods.

5. What is a Bank Rate?
Ans:- Bank rate is the rate at which RBI gives to the
commercial banks. Whenever RBI increases its rates, the
effect will be shown on the commercial banks. In this case,
the commercial banks have to increase the interest rates for
their profits.

Ok, prepare well.

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