Você está na página 1de 4

A repo or repurchase Agreement is an instrument of money market.

Usually reserve
bank (federal bank in U.S) and commercial banks involve in repo transactions but
not restricted to these two. Individuals, banks, financial institutes can also
participate in repurchase agreement.
Repo is a collateralized lending i.e. the banks which borrow money from Reserve Bank to
meet short term needs have to sell securities, usually bonds to Reserve Bank with an
agreement to repurchase the same at a predetermined rate and date. In this way for the lender
of the cash (usually Reserve Bank) the securities sold by the borrower are the collateral
against default risk and for the borrower of cash (usually commercial banks) cash received
from the lender is the collateral.
Reserve bank charges some interest rate on the cash borrowed by banks. This rate is usually
less than the interest rate on bonds as the borrowing is collateral. This interest rate is called
‘repo rate’. The lender of securities is said to be doing repo whereas the lender of cash is said
to be doing ‘reverse repo’.

In a reverse repo Reserve Bank borrows money from banks by lending securities. The interest
paid by Reserve Bank in this case is called reverse repo rate.

Borrower of funds is called as seller of repo and lender of funds is called as buyer of repo.
When the term of the loan is for one day it is known as an overnight repo and if it is for more
than one day it is called a term repo.

The forward clean price of bonds is set at a level which is different from the spot clean price
by adjusting the difference between repo rate and coupon earned on the security.

What is Bank rate? Bank Rate is the rate at which central bank of the country (in India it
is RBI) allows finance to commercial banks. Bank Rate is a tool, which central bank uses
for short-term purposes. Any upward revision in Bank Rate by central bank is an indication
that banks should also increase deposit rates as well as Prime Lending Rate. This any revision
in the Bank rate indicates could mean more or less interest on your deposits and also an
increase or decrease in your EMI.

What is Bank Rate ? (For Non Bankers) : This is the rate at which central bank
(RBI) lends money to other banks or financial institutions. If the bank rate goes up, long-term
interest rates also tend to move up, and vice-versa. Thus, it can said that in case bank rate is
hiked, in all likelihood banks will hikes their own lending rates to ensure and they continue to
make a profit.
What is CRR? The Reserve Bank of India (Amendment) Bill, 2006 has been enacted and
has come into force with its gazette notification. Consequent upon amendment to sub-Section
42(1), the Reserve Bank, having regard to the needs of securing the monetary stability in the
country, can prescribe Cash Reserve Ratio (CRR) for scheduled banks without any floor rate
or ceiling rate. [Before the enactment of this amendment, in terms of Section 42(1) of the
RBI Act, the Reserve Bank could prescribe CRR for scheduled banks between 3 per cent and
20 per cent of total of their demand and time liabilities].

RBI uses CRR either to drain excess liquidity or to release funds needed for the economy
from time to time. Increase in CRR means that banks have less funds available and money is
sucked out of circulation. Thus we can say that this serves duel purposes i.e. it not only ensures
that a portion of bank deposits is totally risk-free, but also enables RBI to control liquidity in the
system, and thereby, inflation by tying the hands of the banks in lending money.

What is CRR (For Non Bankers) : CRR means Cash Reserve Ratio. Banks in India are
required to hold a certain proportion of their deposits in the form of cash. However,
actually Banks don’t hold these as cash with themselves, but deposit such case with
Reserve Bank of India (RBI) / currency chests, which is considered as equivlanet to
holding cash with themselves.. This minimum ratio (that is the part of the total deposits to
be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve
Ratio. Thus, When a bank’s deposits increase by Rs100, and if the cash reserve ratio is
9%, the banks will have to hold additional Rs 9 with RBI and Bank will be able to use
only Rs 91 for investments and lending / credit purpose. Therefore, higher the ratio (i.e.
CRR), the lower is the amount that banks will be able to use for lending and
investment. This power of RBI to reduce the lendable amount by increasing the
CRR, makes it an instrument in the hands of a central bank through which it can control
the amount that banks lend. Thus, it is a tool used by RBI to control liquidity in the
banking system.

What is SLR? Every bank is required to maintain at the close of business every day, a
minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of
cash, gold and un-encumbered approved securities. The ratio of liquid assets to demand and
time liabilities is known as Statutory Liquidity Ratio (SLR). Present SLR is 24%. (reduced
w.e.f. 8/11/208, from earlier 25%) RBI is empowered to increase this ratio up to 40%. An
increase in SLR also restrict the bank’s leverage position to pump more money into the economy.

What is SLR ? (For Non Bankers) : SLR stands for Statutory Liquidity Ratio. This
term is used by bankers and indicates the minimum percentage of deposits that the bank
has to maintain in form of gold, cash or other approved securities. Thus, we can say that
it is ratio of cash and some other approved to liabilities (deposits) It regulates the credit
growth in India.

What are Repo rate and Reverse Repo rate?

Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks.
When the repo rate increases borrowing from RBI becomes more expensive. Therefore, we
can say that in case, RBI wants to make it more expensive for the banks to borrow money, it
increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces
the repo rate

Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the
RBI. The RBI uses this tool when it feels there is too much money floating in the banking
system. An increase in the reverse repo rate means that the RBI will borrow money from the banks
at a higher rate of interest. As a result, banks would prefer to keep their money with the RBI

Thus, we can conclude that Repo Rate signifies the rate at which liquidity is
injected in the banking system by RBI, whereas Reverse repo rate signifies the rate
at which the central bank absorbs liquidity from the banks

6.00% (w.e.f.
Bank Rate
29/04/2003)

Increased from
5.00% to 5.50% wef
6.00% 13/02/2010; and
Cash Reserve Ratio (CRR) (w.e.f. then again to 5.75%
24/04/2010) wef 27/02/2010; and
now to 6.00% wef
24/04/2010

Decreased from
Statutory Liquidity Ratio 24%(w.e.f. 25% which was
(SLR) 18/12/2010) continuing since
07/11/2009

5.50% Increased from


5.25% which was
Reverse Repo Rate (w.e.f. continuing since
25/01/2011) 02/11/2010

6.50% Increased from


6.25% which was
Repo Rate under LAF (w.e.f. continuing since
25/01/2011) 02/11/2010
Beyond CBS : Fast Forward to Banking 2.0! - Address by Dr K C Chakrabarty, DG,
RBI
Do Not Pay Money to receive Large Funds from Abroad : RBI Advisory
RBI releases 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial
Banks : September 2010'
Professor Stanley Fischer, Governor, Bank of Israel delivers the 3rd P. R.
Brahmananda Memorial Lecture on „Central Bank Lessons from the Global Crisis‟
Welcome Remarks by the Governor - Third P. R. Brahmananda Memorial Lecture by
Prof. Stanley Fischer “Central Bank Lessons from the Global Crisis” February 11,
2011

Reserve Bank of India hikes the repo rate under the Liquidity
Adjustment Facility (LAF) by 25 basis points to 8.00%

June 11, 2008: The year-on-year WPI inflation which was 4.36 per cent on
January 12, 2008 (at the time of announcement of the Third Quarter Review for
2007-08) increased to 7.33 per cent on April 12, 2008 (at the time of
announcement of the Annual Policy Statement for 2008-09) and to a high of
8.24 per cent on May 24, 2008. Further, various measures of CPI inflation, which
ranged from 4.8 to 5.9 per cent in January 2008 have increased to a range of
7.8 to 8.9 per cent in April 2008.

In light of the above, and on a review of the current macroeconomic and overall
monetary conditions and with a view to containing inflation expectations, it is
essential to take appropriate action on an urgent basis. Accordingly, the Reserve
Bank of India has decided to increase the repo rate under the Liquidity
Adjustment Facility (LAF) by 25 basis points to 8.00 per cent from 7.75 per cent
with immediate effect. There is no change in the reverse repo rate.

It may be recalled that the Annual Policy Statement for the year 2008-09 (April
29, 2008) had referred to the unprecedented uncertainties and dilemmas that
exist and added "while monetary policy has to respond proactively to immediate
concerns, it cannot afford to ignore considerations over a relatively longer term
perspective of, say, one to two years, with respect to overall macroeconomic
prospects. At the same time, it is critical at this juncture to demonstrate on a
continuing basis a determination to act decisively, effectively and swiftly to curb
any signs of adverse developments in regard to inflation expectations".

The Annual Policy Statement for the year 2008-09...Click Here

Você também pode gostar