Bank rates and its implication on Indian economy

The project report deals with the bank rates and its consequences on Indian economy . These rates are form the basis for development of economy directly and indirectly

Research methodology
The research has been done using secondary sources: 1. 2. 3. 4. Internet Fortnight journals Newspapers and magazines.. Books of senior secondary and graduation to clear concepts. 5. The research has been done and data for various years has been compared to figure out the current scenario. 6. The focus on basics has been our main objective for having a general idea of what the bank rate is all about

Objectives
To find out the monetary and liquidity position of Indian economy.. To figure out how does it Affects the economy. To find out various tools and measures to implement bank rates.

Process Tree

Bank rates Monetary policy

Control inflation Sustain the economy

To understand the concept of money supply and monetary policy.

To understand inflation.

Concepts
Bank rates
Interest rate charged by countrys central on loans and advances to control money supply in the economy and banking sector .

RR,RRR
Policy by which central bank controls money supply in the economy, targeting the rate of interest

Monetary policy

CRR,SLR

Quantitative, Qualitative

Money supply

Money stock is total amount of money available at a specific time in the economy

M1

M2

M3

M4

Inflation

Rise in general price level of G/S in the economy over a period of time .

CPI

WPI

GDP Deflator.

Findings and results

Year Feb 2008 Sept 2008 Dec 2008 Mar 2009 July 2009 Jan 2010 May 2010 Money supply 4060194 4302878 4414019 4670399 5028951 5337566 5677067

Due to this decrease in money supply the R.B.I injected liquidity in the market by decreasing interest rates.

During this period money supply increased at a decreasing rate reason being the Global turmoil at this time..

A more recent scenario

Current rates scenario
35 30 25 20 15 10 5 0 2007 2008 2009 2010 2011 bank rate Reverse Repo rate Repo rate cah reserve ratio

Cash reserve ratio has been constant from the last year at 6% Reserve repo rate has increased by 3 percentage points from 5.25% to 7.25%

Repo rate has increased 2 percentage points from 6.25 % to 8.25%

Inflation has been the major reason for tightening of interest rates ,affecting the liquidity position in the economy

Bank rate has grown consistently over the period of five years at 6%

Findings and results

Inflation at peak
India Inflation Rate at 8.99 percent. The inflation rate in India was last reported at 9 percent in August of 2011.Rbi has almost taken 11

hikes in key interest rates in order to control inflation..

Rising inflation and slowing demand would moderate India's economic growth to 8 per cent

during 2011-12 from 8.8 per

cent in the previous fiscal, said a World Bank report

Calculations and facts

The Data for cash reserve ratio (CRR) are as percentage of net demand and time liabilities (NDTL) as per Section 42 of the RBI Act, 1934. Till Oct. 28, 2004, nomenclature of Repo indicated absorption of liquidity where Reverse Repo meant injection of liquidity by the Reserve Bank.

However , with effect from 29 October 2004 nomenclature of Repo and Reverse Repo has been interchanged as per international usages.
Beginning May 03, 2011 the repo rate became the single independently varying policy rate to single the monetary policy stance. The reverse repo rate continues to be operative but it is now pegged at a fixed 100 basis points below the repo rate and is no longer an independent rate..

bibliography
Data has been collected from various sites and various books have been used for clearing of concepts.. 1. Wikipedia.org 2. Investopedia.com 3. Franklintempelton.org.in 4. Economictimes.indiatimes.com 5. Rbi.org.in 1. 2. 3. Books consulted Macro economics concepts-Sp jain Macro economics India-Ck Gupta Macro economics TR jain V.K ohri

Our interpretation

Used as an effective tool to monitor economic growth.. Used mainly to control money supply

Money supply
Determines the total amount of currency floating in the economy. Is considered as a major factor for inflation

Rise in general price level Affects the economic growth of the country

Bank rates

Inflation

Thank you
Group No: 1 Ankit singh karki Faisal khan Soumya umesan Purnadal bagchi Charu chaudhari