LATEST CRR, SLR, REPO, REVERSE REPO, BANK RATE, SDF AND MSF RATES
| Particulars | Â Percentage |
| Cash Reserve Ratio(CRR) | Â Â Â Â Â Â Â Â Â Â Â Â 4.00 |
| Statutory Liquidity Ratio(SLR) | Â Â Â Â Â Â Â Â Â Â 18.00 |
| Repo Rate | Â Â Â Â Â Â Â Â Â Â Â Â 6.50 |
| Reverse Repo Rate | Â Â Â Â Â Â Â Â Â Â Â Â 3.35 |
| Bank Rate | Â Â Â Â Â Â Â Â Â Â Â Â 6.75 |
| Standing Deposit Facility Rate (SDFR) | Â Â Â Â Â Â Â Â Â Â Â Â 6.25 |
| Marginal Standing Facility Rate | Â Â Â Â Â Â Â Â Â Â Â Â 6.75 |
Cash Reserve Ratio (CRR)
As per Statutory requirement Banks need to maintain some amount with RBI kept as reserves.
In simple words CRR is the percentage of a Bank’s total deposits (including both demand deposits like savings accounts and time deposits like fixed deposits) that the bank must keep as a cash reserve.
This cash reserve can either be kept as cash in the banks own vault or as a deposit in the banks account with the Reserve Bank of India (RBI).
CRR is mandatory for all banks because it is a legal requirement set by the RBI.
Example
Imagine a bank has ₹100 crore in total deposits.
If the CRR is 4.50%, the bank must keep ₹4.5 crore as a cash reserve.
This money cannot be used for giving loans or investments.
CRR helps the RBI control the money supply in the economy.
Impact of CRR
If the RBI increases CRR, banks have less money to lend, which can reduce inflation.
If the RBI lowers CRR, banks can lend more, which boosts economic growth.
Statutory Liquidity Ratio (SLR)
In simple words SLR is the percentage of a Bank’s total deposits (both demand deposits like savings accounts and time deposits like fixed deposits) that the bank must set aside in the form of:
- Cash,
- Gold, or
- Approved government securities (like bonds).
This helps ensure that banks have enough liquid assets (assets that can easily be converted to cash) to meet their obligations and safeguard the money deposited by customers.
It also helps the Reserve Bank of India (RBI) control the money supply and maintain stability in the economy.
Example
If a bank has ₹100 crore in deposits and the SLR is 18%, the bank must keep ₹18 crore as cash, gold, or government-approved securities.
This money Banks cannot be used for loans or other investments.
Why is SLR important?
Liquidity:
It ensures banks have enough funds available for emergencies.
Safety:
It reduces the risk of banks running out of money.
Control:
The RBI can adjust the SLR to control inflation or promote economic growth.
For instance
If inflation is high, the RBI may increase the SLR, so banks lend less and reduce money circulation.
If the economy needs a boost, the RBI may lower the SLR, so banks can lend more to businesses and individuals.
Repo Rate
Repo Rate is the interest rate at which banks borrow money from the Reserve Bank of India (RBI) for a short time by giving government-approved securities (like bonds) as collateral.
The bank agrees to buy back these securities from the RBI on a specific future date at a pre-decided price.
Banks usually use the repo mechanism to manage their short-term money needs.
Example:
Suppose a bank needs ₹10 crore for a few days. It can borrow this amount from the RBI by giving securities (like government bonds) as a guarantee.
If the repo rate is 6%, the bank will have to repay ₹10 crore plus 6% interest (on an annual basis, adjusted for the number of days) when it repurchases the securities from the RBI.
Why is Repo Rate important?
For Banks:
It provides quick access to funds when needed.
For RBI:
It helps control the money supply and inflation.
How it works:
If the RBI increases the repo rate
Borrowing becomes more expensive for banks, so they may reduce lending to customers, which slows down inflation.
If the RBI decreases the repo rate:
Borrowing becomes cheaper for banks, encouraging them to lend more to businesses and individuals, which boosts economic growth.
Reverse Repo Rate
Reverse Repo Rate is the interest rate at which banks lend their extra money to the Reserve Bank of India (RBI).
It is the opposite of the Repo Rate, where banks borrow from the RBI.
When banks have more money than they need, they can “park” this money with the RBI and earn interest at the Reverse Repo Rate.
Example
If a bank has ₹100 crore that it doesn’t need to use immediately, it can deposit this money with the RBI.
If the Reverse Repo Rate is 4%, the bank will earn 4% interest on that ₹100 crore.
Why is Reverse Repo Rate important?
For Banks:
It provides a safe way to earn interest on surplus funds.
For RBI:
It helps control the money supply in the economy.
How it works
If the RBI increases the Reverse Repo Rate:
Banks are encouraged to park more money with the RBI, which reduces the amount of money circulating in the economy and helps control inflation.
If the RBI lowers the Reverse Repo Rate
Banks may lend more to customers instead of parking money with the RBI, which boosts economic activity.
Bank Rate
Bank Rate is the interest rate at which commercial banks can borrow money from the Reserve Bank of India (RBI) without giving any collateral.
This rate usually reflects the long-term direction of the economy.
When the RBI changes the Bank Rate, it affects how much banks charge their customers for loans.
Example
If the Bank Rate is 6% and a commercial bank borrows ₹100 crore from the RBI, the bank will have to repay ₹100 crore plus 6% interest.
How it affects banks and the economy
If the RBI increases the Bank Rate
Borrowing becomes more expensive for banks.
Banks may increase their loan interest rates for customers to cover their costs.
This can slow down borrowing and spending, which helps control inflation.
If the RBI decreases the Bank Rate
Borrowing becomes cheaper for banks.
Banks may lower their loan interest rates for customers.
This encourages borrowing and investment, which can boost economic growth.
Why is it important?
The Bank Rate is a signal of the economy’s health.
For Example,
Aan upward revision might mean the RBI is trying to control inflation, while a downward revision could mean the RBI wants to stimulate growth.
Marginal Standing Facility (MSF)
It is a special service provided by the Reserve Bank of India (RBI) to help banks during emergencies when they run out of money.
This facility lets banks borrow money overnight from the RBI to handle urgent cash needs.
Key Features of MSF
Banks borrow money by pledging government bonds as collateral.
The interest rate for MSF is higher than the regular Repo Rate, so it’s a more expensive option.
MSF is meant to be a last resort for banks when no other funds are available.
Example
Imagine a bank suddenly needs ₹500 crore to meet its commitments for the day, but it doesn’t have enough cash.
The bank can use MSF to borrow this amount from the RBI by pledging its government securities.
If the Repo Rate is 6% and the MSF rate is 6.5%, the bank will pay 6.5% interest on the borrowed amount.
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Why Does MSF Matter?
Emergency Help
It gives banks a quick way to get funds during financial stress.
System Stability
By offering MSF, the RBI ensures that banks don’t default on their payments.
Monetary Control
The RBI uses MSF to regulate the money supply in the economy.
How is MSF Different from Repo Rate?
The Repo Rate is a cheaper option that banks use for regular short-term borrowing.
MSF is more expensive and is used only when banks have no other options for liquidity.
When Is MSF Used?
Banks often use MSF during cash crunches, such as festival seasons or unexpected financial crises.
Because of its higher cost, banks only rely on MSF when other sources of funding are unavailable.
In simple terms, MSF acts like an emergency credit card for banks, helping them manage short-term cash shortages while keeping the financial system stable.
