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Key RBI Rates, Key RBI Rates - Coggle Diagram
Key RBI Rates
Key RBI Rates
1. Repo Rate
Rate at which banks borrow money from RBI
High Repo Rate
Increases cost of browing
Slows economic growth
Markets do not like a hike in repo rate
2. Reverse Repo Rate
It is the deposit rate RBI offers to other banks when the banks park funds with RBI.
An increase in reverse repo rate
Will induce the banks to park money with RBI rather than lending it to the corporates.
Tightens money supply
Markets will react negatively
3. Cash Reserve Ratio (CRR)
Every bank must maintain funds with RBI.
The amount that they maintain is dependent on the CRR.
If CRR increases, more money is sucked out of the mainstream economy
Tightens money supply
Markets will react negatively
4. Which industries will react to rate decisions first?
Interest sensitive industries
Banks
Real Estate
Housing Finance
Automobiles
Metals