Student Community
Answer
To decrease money supply in the economy, reverse repo rate should be increased. Explanation:- Reverse Repo Rate:- it is the rate of interest at which commercial banks can deposit their surplus funds with the Central Bank, for a relatively shorter…
Statutory Liquidity Ratio refers to minimum percentage of net demand and time liabilities which commercial banks are required to maintain with themselves. Explanation:- According to Legal Reserve requirements, commercial banks are obliged to maintain reserves. in the form of CRR…
Monetary Policy is the policy adopted by the Central Bank of an economy in the direction of credit control or money supply. Explanation:- The Reserve Bank of India (RBI) is empowered to regulate the money supply in the economy through…
Repo rate is applicable to Short-term lending, while bank rate is applicable to long-term lending. Explanation:- Repo Rate:- The repo rate is the rate at which the central bank of a country lends money to commercial banks to meet their…
Money Multiplier = 1/LRR LRR = Legal Reserve Ratio Explanation:- Money Multiplier is the process by which commercial banks create credit, based upon the reserve ratio and initial deposits. It is calculated as:- Money Multiplier = 1/LLR For example: LRR…
Central bank has sole monopoly in issue of currency. Explanation:- One of the functions of the Central Bank is: Current Authority (or Bank of Issue):- The Central Bank has the sole authority for the issue of currency in the country.…
Bank Rate is also known as Discount Rate. Explanation:- The Bank Rate is the rate at which the central bank provides long-term loans to commercial banks to meet their financial requirements. The Bank Rate is also known as the Discount…
Reverse Repo Rate is exact opposite of Repo Rate. Explanation:- Repo rate is the rate of interest at which the Central Bank provides short-term loans to the Commercial Bank The Reverse Repo Rate is the rate of interest at which…
Open Market Operations refers to the buying and selling of government securities by the Central Bank from/to the public and commercial banks. Explanation:- Open Market Operations is one of the quantitative Credit Control Instruments of RBI. By practicing it, the…
The Repo Rate or Repurchase Rate is the rate at which RBI lends money to commercial banks to meet their short-term needs. Explanation:- The Rep Rate is also the Repurchase Rate as Repo stands for ‘Repurchasing Option’ or ‘Repurchase Agreement’.…