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how does the CRR, Repo Rate, reverse repo rate and bank
rate related with inflation and discuss the relation.
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Answer Posted / karthikeyan.k
CRR-cash reserve rate-it is cash reserve at RBI for the
security purpose of bank
when the CRR increased by the RBI (if they want control
inflation)the money circulation will be reduced because of
the bank want to reserve more money with earlier stage they
are not able to issue more money to public, that leads to
low money in the hand of public so the purchasing power will
be reduce it leads price will be reduce in the market so
automatically the inflation Controlled by the CRR tools
REPO RATE-is refered to bank money borrow from RBI for
transaction to the public when the borrow of money is low it
make the issue of money the public is always is low the
public purchasing power is also low it leads to reduce the
General price level in the market automatically inflation
control by REPO RATE is one of the tools for the bank
activities
Generally-When the money supply reduce in the economy it
leads to purchasing power of people is also reduce in the
economy so it will make general price level (inflation)will
fall down and vise versa
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