Rbi rates

Rbi rates

Liquidity Adjustment Facility (LAF)

Policy Repo Rate : 6.25%
Reverse Repo Rate : 6.00%

Policy rates :

Marginal Standing Facility (MSF) Rate : 6.50%
Bank Rate : 6.50%

Reserve Ratios :

CRR : 4%
SLR : 20.50%

Lending Rates :

Base Rate : 9.10% - 9.60%
MCLR (Overnight) : 7.75% - 8.20%

Deposit Rates :

Savings Deposit Rate : 4.00%
Term Deposit Rate > 1 Year : 6.50% - 7.00%

MCLR

MCLR stands for Marginal Cost of Funds based Lending Rate. It replaced the Base Rate system from April 2016. (Base Rate is the minimum rate, as set by the RBI, below which banks are not allowed to lend to its customers). MCLR is a tenor- based internal benchmark lending rate, instead of a single rate. The banks can now price their loans, as per their funding composition and strategies on different MCLRs.  Banks need to review and publish their MCLR monthly.

Bank Rate -

Bank rate (which is also referred to as the Discount rate in American English) is the rate of interest which a Central bank (RBI in India) charges on the loans and advances to a commercial banks. .

Liquidity Adjustment Facility (LAF) -

Liquidity Adjustment Facility may be defined as a Monetary Policy tool, which helps banks to borrow money through Repurchase agreements. Banks use LAF to adjust the day to day mismatches in liquidity.LAF consists of repo and reverse repo operations. IN LAF,money transaction is done through RTGS(Real time Gross settlement). Repo Rate and Reverse Repo rate are the two major components of LAF. The minimum bidding amount is Rs. 5 crores.

Repo Rate

Repo rate is the rate at which the Central bank (RBI in India) lends money to commercial banks. Repo rate stands for Repurchase Rate. Repo rate is usually offered for loans of short durations (up to 2 weeks).. Repo rate is used by monetary authorities to control inflation.

Let us have a quick glance at the difference between Bank Rate and Repo Rate -
  • Bank rate is offered against the loans provided by Central bank to commercial banks. Repo rate is usually offered for repurchasing of securities, that are sold by commercial banks to the central bank.
  • Repo rate is usually for short term financial requirements while bank rate serves the long term financial needs of the banks.
  • Repo rate is always lower that Bank rate.
  • Securities, bonds, agreements and collaterals are involved in case of Repo rate. In case of bank rate, no collateral is involved.

Reverse Repo Rate -

Reverse Repo Rate is defined as the interest rate, that is offered by RBI to the commercial banks within the country, to deposit their surplus funds with RBI for short period of time.

Cash Reserve Ratio (CRR) -

Cash Reserve Ratio is defined as the minimum specified fraction/ share of the net demand and time liabilities, that the commercial banks in the country are required to maintain in form of cash or deposits with the central bank (RBI in India).

Statutory Liquidity Ratio (SLR) -

Statutory Liquidity Ratio is defined as the percent/ share of the net demand and time liabilities, that the commercial banks in the country are required to maintain in form of gold and government securities. RBI determines SLR in the country, in order to keep a check on the expansion of Bank credit.

Marginal Standing Facility (MSF) -

Marginal Standing Facility is defined as the rate at which scheduled banks in India can borrow funds from RBI overnight, against the government securities. MSF is usually higher than Repo Rate. MSF was introduced by RBI to control volatility in the overnight lending rates. The minimum amount that can be borrowed under MSF is Rs. 1 crore.

Now, have a look at the table below -
Rate  Duration for which it is offeredCollateral/ Securities involved
Bank Rate   For Long Term LoansNot Required
Repo Rate   For Short Term LoansRequired
Marginal Standing Facility   For Overnight LoansRequired

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