Different kinds of Interest rates fixed by RBI
1. Repo rate:
We approach Bank or financial institution for the loan when we face financial crises, likewise when these commercial banks or financial institutions face a shortfall of money, they approach the central bank i.e. which is Reserve Bank of India in our country. Commercial banks also sell their government securities to RBI at predetermined rate. The rate at which RBI lend money to commercial banks is called as Repo rate or repurchase rate. The current Repo Rate as fixed by the RBI is 6.50% p.a. The Reserve Bank of India increased the Repo Rate again on the 1st of August 2018 from 6.25% to 6.50%.
2. Reverse repo rate:
When Central bank faces financial crunch they offer commercial banks to deposit their excess funds with RBI treasury and offers them amazing interest rates. Commercial banks can also voluntarily deposit their funds with RBI to keep it safe and secure with them. Reverse repo rate is always less than the repo rate. At present, reverse repo rate is 6.25%.
3. Marginal Standing Facility Rate (MSF):
When bank face shortage of cash then they take up RBI offer of MSF i.e borrow cash against their approved government securities with RBI. This offer is taken up by the commercial banks in case of urgent and emergency situations. MSF rate is always more than the repo rate since its use is on emergency, so the interest charged id quite hefty. The MSF rate at present stands at 6.75% p.a
4. Cash Reserve Ratio (CRR):
In India, commercial banks are required to keep some liquid cash (the certain percentage of their deposit). So the banks deposit that liquid cash with RBI which is same as cash in hand. The percentage of deposit to be kept aside as liquid cash is called as CRR. The percentage of CRR is fixed by Reserve Bank of India. The current CRR is 4% p.a.
5. Statutory Liquidity Ratio (SLR):
At the end of every business day, banks are needed to maintain a minimum ratio of their Time liabilities (when the bank has to wait to redeem their liabilities) and Net Demand (when the bank can withdraw money from these accounts immediately) in the form of liquid assets like gold, cash and government securities. The ratio of time liabilities and liquid assets in demand is called Statutory Liquidity Ratio or SLR. The maximum SLR that The Reserve Bank of India can set is 40% per annum. However, the current SLR stands at 19.5% p.a
6. Base Rate:
This minimum rate below which the banks cannot lend to their customers is called the Base Rate in banking terms. This minimum rate is fixed by the Reserve Bank of India. It is the minimum rate of interest the banks are permitted to charge their customers. The current Base Rate fixed by the RBI is 8.75% to 9.45% p.a.
7. Savings Deposit Rate:
The interest rate earned by an account holder for the amount maintained in their savings account is called savings deposit rate. The current savings deposit rate is 4.00% per annum.
8. Term Deposit Rate:
Customers who deposit money into their account and agrees to fix it till a particular date is awarded term deposit rate. The current term deposit rate for more than one year tenure is 6.25% to 7%.
Comments are closed.