Economy (Pre)

Economic and Social Development - Sustainable Development, Poverty, Inclusion,   Demographics, Social Sector initiatives, etc.

Economics is not very hard to study, once you able to build concept then you will love to read and score good marks in it. 

Suggested Reading ......

Ramesh Singh's Indian Economy Book

Economics Video Lecture

RESERVE BANK OF INDIA

Tuesday, December 08, 2015

7:16 PM

Working :- Central Bank

1. Issuer of the currency and coins but one rupee currency and coin issued by ministry of finance (secretary of finance signature)

2. Distributing agent of currency and coins issued by the govt.

3. Banker and debt manager to the Government

4. Monetary authority (Credit and Monetary policy)

5. Banker to Banks/Bank of last resort

6. Regulator to Banking system

7. Manager of foreign exchange

8. Maintaining Financial stability

9. Developmental functions (IDBI, SIDBI, NABARD, NHB)

10. Agent of the Government of India in the IMF and G-20

Monetary policy :-

The policy by which the desired level of money  and its demand is regulated is known as the credit and monetary policy.

There are many tools by which the RBI regulates the Money in the market.

i.e. CRR, SLR, Bank Rate, Repo Rate, Reverse Repo Rate,

MSS, OMO, LAF, MSF, Base Rate etc.

Cash Reserve Ratio :-

The cash reserve ratio is the ratio fixed by the RBI of the total deposits of bank in India which is kept with RBI in cash forms.

If cash reserve ratio increases thus reducing the money in the banking system

Statutory Liquidity Ratio :-(statue) 

Statutory liquidity ratio is the ratio of the total deposits of bank  which is to be maintain by the bank itself in non-cash form prescribed by the Government. 

i.e. Gold, Government Securities

Bank rate :-

The interest rate which the RBI charges from its clients on their long-term borrowings.

Client :- Central and State Government, Banks, Financial Institutions,

Cooperative Banks, NBFI.

Repo Rate :- (Rate of Repurchase/Repurchase obligation)

The rate of interest charge by the RBI from its clients on their short term borrowings.  (rate of discount)

Reverse Repo rate :-

It is the rate of interest pays by the RBI to its clients who offer short term loan to it.

In one way bank lend money to RBI

Market Stabilisation Scheme :-

Under this scheme, RBI, on behalf of government, raises money from the market by providing government securities, like Treasury Bills, Dated Securities, etc.

Sells the treasury bill and Govt. securities in Market.

Open Market Operation :-

To increase or reduce the flow of money in the market RBI purchase or sell the Government Securities called as the OMO.

Liquidity Adjustment Facility :-

It is a monetary policy tool which allows banks to borrow money through repurchase agreements. LAF is used to aid banks in adjusting the day to day mismatches in liquidity. LAF consists of repo and reverse repo operations.

Marginal Standing Facility :-

If bank need adjustment in liquidity to meet criteria addressed by RBI.

Banks can use 1% Money for overnight on deposited amount.

RBI charges one day interest on this facility.

If Repo rate 7% then

MSF= repo rate +1%

Reverse repo rate =repo rate -1%

Base Rate :-

It is the interest rate fixed by the bank below which no money will lend no loan to its costumers