Bank rates and its implication on indian economy

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comprehensive report on bank rates and its implication

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  • Reserve Money (M0): Currency in circulation + Bankers’ deposits with the RBI + ‘Other’ deposits with the RBI = Net RBI credit to the Government + RBI credit to the commercial sector + RBI’s claims on banks + RBI’s net foreign assets + Government’s currency liabilities to the public – RBI’s net non-monetary liabilities.M1: Currency with the public + Deposit money of the public (Demand deposits with the banking system + ‘Other’ deposits with the RBI).M2: M1 + Savings deposits with Post office savings banks.M3: M1+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the commercial sector + Net foreign exchange assets of the banking sector + Government’s currency liabilities to the public – Net non-monetary liabilities of the banking sector (Other than Time Deposits).M4: M3 + All deposits with post office savings banks (excluding National Savings Certificates).Reverse repo rate, determined with a spread of 100 basis points below the repo rateMarginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, What Does Open Market Operations - OMO Mean?The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite. Read more: http://www.investopedia.com/terms/o/openmarketoperations.asp#ixzz1bHTSCqLM
  • Bank rates and its implication on indian economy

    1. 1. Bank rates and its implication onIndian economyThe project report deals with the bank ratesand its consequences on Indian economy .These rates are form the basis fordevelopment of economy directly andindirectly
    2. 2. Research methodology• The research has been done using secondary sources:1. Internet2. Fortnight journals3. Newspapers and magazines..4. 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…
    3. 3. Objectives Process Tree• To find out the monetary and liquidity position of Indian economy.. Bank rates• To figure out how does it Affects the economy. Monetary policy• To find out various tools and measures to implement bank rates. Control inflation• To understand the concept of money supply and monetary Sustain the policy. economy• To understand inflation.
    4. 4. Concepts Bank rates • Interest rate charged by country’s central on loans and advances to control money supply in the economy and banking sector . RR,RRR Monetary • Policy by which central bank controls policy money supply in the economy, targeting the rate of interest CRR,SLR Quantitative, Qualitative • Money stock is total amount of money Money supply 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.
    5. 5. Findings and results Year Money supply Feb 2008 4060194 Sept 2008 4302878 Dec 2008 4414019 Mar 2009 4670399 July 2009 5028951 Jan 2010 5337566 May 2010 5677067 During this period money Due to this decrease in money supply increased at a supply the R.B.I injected decreasing rate reason being liquidity in the market by the Global turmoil at this decreasing interest rates. time…..
    6. 6. A more recent scenario Cash reserve ratio has been constant from the last year at 6% Current rates scenario3530 Reserve repo rate has increased25 by 3 percentage points from 5.25% to 7.25%201510 5 Repo rate has increased 2 percentage points from 6.25 % 0 to 8.25% 2007 2008 2009 2010 2011 bank rate Repo rate Reverse Repo rate cah reserve ratio Bank rate has grown consistently over the period of Inflation has been the major reason for five years at 6% tightening of interest rates ,affecting the liquidity position in the economy
    7. 7. Findings and results Inflation at India Inflation Rate at 8.99 percent. The inflation rate in India was last peak 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 Indias economic growth to 8 per cent during 2011-12 from 8.8 per cent in the previous fiscal, said a World Bank report
    8. 8. 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…..
    9. 9. bibliography• Data has been collected from various sites and various books have been used for clearing of concepts..1. Wikipedia.org2. Investopedia.com3. Franklintempelton.org.in4. Economictimes.indiatimes.com5. Rbi.org.in• Books consulted1. Macro economics concepts-Sp jain2. Macro economics India-Ck Gupta3. Macro economics – TR jain V.K ohri
    10. 10. Our interpretation Money• Used as an effective tool to monitor economic supply • Rise in general price level growth.. • Determines the total • Affects the economic amount of currency growth of the country• Used mainly to control floating in the economy. money supply • Is considered as a major factor for inflation Bank rates Inflation
    11. 11. Thank you• Group No: 1• Ankit singh karki• Faisal khan• Soumya umesan• Purnadal bagchi• Charu chaudhari

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