What do you know about Banking?

A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a fundamental component of the financial system, and are also active players in financial markets. The essential role of a bank is to connect those who have capital (such as investors or depositors), with those who seek capital (such as individuals wanting a loan, or businesses wanting to grow). What is Bank Rate? Bank rate is the rate of interest which RBI charges on the loans and advances that it extends to banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply. What is Repo Rate? The rate at which the RBI lends money to commercial banks is called repo rate, a short term for repurchase agreement. A 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. What is Reverse Repo Rate? The rate at which banks park their money with Reserve Bank is called the reverse repo rate. What is Marginal Standing Facility (MSF) Rate? The Marginal Standing Facility (MSF) Scheme is operational on the lines of the existing Liquidity Adjustment Facility Repo Scheme (LAF Repo) i.e. commercial banks can borrow money from RBI. The basic difference between Repo and MSF scheme is that in MSF banks can use the securities under SLR to get loans from RBI and hence MSF rate is 1% more than repo rate. Read more about MSF here What is CRR? Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI. What is SLR? Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities.