Introduction:

Bank Rate is the rate at which central bank of the country allows finance to commercial banks.
Bank Rate is a tool, which central bank uses for short-term purposes. . The rate at which a
central bank is prepared to lend money to its domestic banking system. The commercial
banks offer this rate and it affects the investments. Now the bank rate is 6%, Changes in the
bank rate are often used by central banks to control the money supply. It is the only rate which
helps the economy in controlling inflation and deflation. Bank rate serves as a basic parameter
to the commercial banks to fix interest on long term loan to the individuals and coporates. The
interest rate at which the central bank in a country repurchases government securities from
commercial banks. The repo rate is the difference between borrowed and paid back cash
expressed as a percentage. The repo rate is 8%.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. Reverse repo rate is the rate at which the central bank of a country borrows money
from commercial banks within the country. It is a monetary policy instrument which can be
used to control the money supply in the country. Now Reverse repo rate is also 6%.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.

Objectives:

The research seeks to study the bank rate of Bangladesh and bank repo of bangladesh with
relation to the following points:

1) To understand as how the bank rate and repo process works

2) To analyze the impact of bank rate and bank repo in the banking sector of Bangladesh.

3) The bank rate model and the bank repo chart of the bank of Bangladesh.
Definition:

Bank Rate:
The interest rate at which a nation's central bank lends money to domestic banks. Often these
loans are very short in duration. Managing the bank rate is a preferred method by which entral
banks can regulate the level of economic activity. Lower bank rates can help to expand the
economy, when unemployment is high, by lowering the cost of funds for borrowers.
Conversely, higher bank rates help to reign in the economy, when inflation is higher than
desired. The bank rate can also refer to the interest rate which banks charge customers on
loans .

Call money market's Schedule banks'

End of Bank weighted average weighted average
interest rates on interest rates on Spread
period rate
Borrowing Lending Deposits Advances
2014* 5.00 6.86 6.86
2013 5.00 7.78 7.78
2012 5.00 12.82 12.82 8.26 13.77 5.51
2011 5.00 11.16 11.16 7.46 12.80 5.34
2010 5.00 8.06 8.06 6.08 11.34 5.26
2009 5.00 4.39 4.39 6.29 11.51 5.22
2008 5.00 10.24 10.24 7.09 12.40 5.32
2007 5.00 7.37 7.37 6.84 12.78 5.95
2006 5.00 11.11 11.11 6.99 12.60 5.61
2005 5.00 9.57 9.57 5.90 11.25 5.35
*: data upto month of September of year 2014.
Repo:
Repo rate is the rate at which the central bank of a country lends money to commercial banks
in the event of any shortfall of funds. Repo rate is used by monetary authorities to control
inflation.
The repo rate is the interest rate at which commercial banks can borrow money from the
Reserve Bank.

Repo rate is the rate at which banks borrow funds from the to meet the gap between the
demand they are facing for money and how much they have on hand to lend.

Repo with Bangladesh Bank

Bids received Bids accepted

Auction
Tenor Total Total Int. Total Amount Cut-off
date
bids amount rate(%) bids (cr rate(%)
(cr Taka) Taka)

Total 4 13590.65 0 0

Bid not
18/12/2011 01 4 13523.66 7.2500
accepted.

Total 4 13523.66 0 0

Special Repo with Bangladesh Bank

Bids received Bids accepted

Auction
Tenor Total Amount Range of Total Amount Cut-off
date
bids (cr rate(%) bids (cr rate(%)
Taka) Taka)

31/07/2014 3 1 50 10.2500 1 30 10.25

Total 1 50 1 30
27/07/2014 4 1 50 10.2500 1 30 10.25

Total 1 50 1 30

Reverse Repo with Bangladesh Bank

Bids received Bids accepted

Auction
Tenor Total Amount Range of Total Amount Cut-off
date
bids (cr rate(%) bids (cr rate(%)
Taka) Taka)

22/10/2014 1 4 1747 5.2500 4 1747 5.2500

Total 4 1747 4 1747

21/10/2014 1 4 1712 5.2500 4 1712 5.2500

Total 4 1712 4 1712

Inter-Bank Repo

Repo
Volume Interest rates
Tenor
Auction
date No. of Total Range of Int Weighted
transactions amount tenor in rate average rate
(cr Taka) days (%) (%)

7.25-
22/10/2014 20 2763.4263 1-7 7.7100
9.15

7.25-
21/10/2014 20 2236.222 1-7 7.9200
9.25

[1 crore=10 million]
Definition of 'Reverse Repurchase Agreement':

The purchase of securities with the agreement to sell them at a higher price at a specific future
date.

For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the
party on the other end of the transaction (buying the security and agreeing to sell in the future)
it is a reverse repurchase agreement.

Reverse Repo :
Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks,
while repo signifies the rate at which liquidity is injected.

Reverse Repo rate is the rate of interest at which the central bank borrows funds from other
banks for a short duration. The banks deposit their short term excess funds with the central
bank and earn interest on it.

The Bank Profitability for Bangladesh:

To remain viable, a bank must earn adequate profit on its investment.this calls for adequate
margin between deposit rates and mergin rates.in this respect, appropriate fixing of interest
rates on both advances and deposit its critical.

Operating profit margin:

The operating profit margin measures the percentage of each sales dollar remaining after all
costs and expenses other than interest, taxes and preferred stock dividends are deducted.

For Dhaka Bank 66.36%

Net profit margin:

The net profit margin measures the percentage of each sales dollar remaining after all costs and
expenses, including interest, taxes, and preferred stock dividends have been deducted.

For Dhaka Bank 22.65%

Earnings per share (EPS):

EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock. Earnings per share is calculated as follows: For Dhaka Bank Tk. 45.09
Return on Assets:
The return on total assets (ROA), often called the return on investment (ROI), measured the
overall effectiveness of management in generating profits with its available assets. The higher
the firms return on total assets, the better.

For Dhaka Bank 1.23%

Security gains:
Results from the fact that securities held for investment are shown at historical cost

This may result in a gain or loss when the security is sold.

Theory:
The theory of bank rate thats premium or discount of one currency against another
should reflect the interest diffential between the two currencies
increase in the bank rate discourages banks from borrowing to meet reserve
requirements, causing them to build up reserves
Repo is the sale of a short-term security (collateral) and buying it back in the future at a
predetermined (higher) price.
Repos are used by the Federal Reserve in open market operations.
Similar to a fed fund loan, but collateralized

Explanation:
Bank rate is the rate of interest which RBI charges on the loans and advances that it extends to
commercial banks and other financial intermediaries. Repo rate is basically the rate charged on
this thing called a repo or repurchase agreement. Essentially, a repurchase agreement is an
agreement between one party and another in which the former sells a security to the latter
with a promise to buy it back after a particular period. The rate at which RBI borrows money
from the banks is termed the reverse repo rate. The RBI uses this tool when it feels there is too
much money floating in the banking system. When RBI wants to decrease the lending activities
in the country, it will increase the Repo Rate. Once the Repo Rate is increased, the cost of funds
to banks from RBI will increase and it will in turn increase the lending rates to customers. This
will reduce the lending transactions.
Conclusion:
Banks provide security and convenience for managing money and sometimes allow to make
money by earning interest. Convenience and fees are two of the most important things to
consider when choosing a bank. Debit cards provide easy access to the cash in account.
Regularly balancing checkbook or developing another method to stay on top account balance is
essential to successfully manage checking account and avoiding fees and bounced checks. To
protect money from electronic theft, identity theft, and other forms of fraud, it's important to
implement basic precautions such as shredding account statements, having complex passwords
and only doing online banking through secure internet connections.
Reference:
http://seminarprojects.com/Thread-bank-rate-ppt#ixzz3HLUgWT9O

http://www.slideshare.net/ahana04/repo-rate-and-reverse-repo-rate-26299054

http://www.investopedia.com/terms/b/bankrate.asp

http://economictimes.indiatimes.com/definition/repo-rate

http://www.allinterview.com/viewpost/124740/explaining-different-rates-monetary-policy-used-rbi-
repo-repurchase-rate-at-bank.html

http://notekhata.com/uploaded_files/1370759042964_FIN404%20Presentation.ppt
http://iasmentor.wordpress.com/2010/05/16/explanation-of-crr-slr-bank-rate-plr-repo-reverse-
repocall-money-concepts/