The document discusses the effects of repo rate changes on the Indian economy. It analyzes the relationship between repo rate and inflation, exchange rates, GDP growth, and fiscal deficit. The Reserve Bank of India uses repo rate as a monetary policy tool to control money supply and influence these economic factors. The analysis finds that repo rate and inflation, exchange rates, and GDP are inversely related, while repo rate and fiscal deficit are positively related. It also examines how RBI has effectively used repo rate reductions to boost economic growth in India.
Indian economy is one of the world’s fastest growing economies with special growth of banking sector in the past few decades. Banking sector is the backbone of any economy. The Indian banking sector has experienced considerable growth since the introduction of financial sector reforms and liberalisation of economy in 1991. Though the banking industry is well regulated by Reserve Bank of India, still the sector suffers from financial distress. This study endeavours to cover banking frauds. In this article, author analyses the current financial difficulties in the banking sector due to the scams and frauds. The report discusses about the case of mounting Non performing assets in past few years across Indian scheduled public sector banks. Majority of the banks in India are facing the problems of low lending rate and nonperforming assets. Scams and non payment of the loans by the influential and wilful defaulters are one of the major problems for the banks at present. The author suggests certain measures to reduce banking sector frauds. Mrs Sunindita Pan "Analysis of Frauds in Indian Banking Sector" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-3 , April 2020, URL: https://www.ijtsrd.com/papers/ijtsrd30238.pdf Paper Url :https://www.ijtsrd.com/economics/financial-economics/30238/analysis-of-frauds-in-indian-banking-sector/mrs-sunindita-pan
Falling of Indian Currency. Rise of Dollar.Aankhi Anwesha
Rupee in tears while dollar sneers. From an investors’ perspective, the movement of rupee may not matter much as only a few can figure out that unlike Sensex, the rupee going up is not positive news, but on the contrary, it actually means rupee is becoming weaker. Many wrongly think that if rupee goes up it is something good for them not realising when the Indian currency depreciates against any foreign currency it has many negative impacts from the economic point of view.
Indian economy is one of the world’s fastest growing economies with special growth of banking sector in the past few decades. Banking sector is the backbone of any economy. The Indian banking sector has experienced considerable growth since the introduction of financial sector reforms and liberalisation of economy in 1991. Though the banking industry is well regulated by Reserve Bank of India, still the sector suffers from financial distress. This study endeavours to cover banking frauds. In this article, author analyses the current financial difficulties in the banking sector due to the scams and frauds. The report discusses about the case of mounting Non performing assets in past few years across Indian scheduled public sector banks. Majority of the banks in India are facing the problems of low lending rate and nonperforming assets. Scams and non payment of the loans by the influential and wilful defaulters are one of the major problems for the banks at present. The author suggests certain measures to reduce banking sector frauds. Mrs Sunindita Pan "Analysis of Frauds in Indian Banking Sector" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-3 , April 2020, URL: https://www.ijtsrd.com/papers/ijtsrd30238.pdf Paper Url :https://www.ijtsrd.com/economics/financial-economics/30238/analysis-of-frauds-in-indian-banking-sector/mrs-sunindita-pan
Falling of Indian Currency. Rise of Dollar.Aankhi Anwesha
Rupee in tears while dollar sneers. From an investors’ perspective, the movement of rupee may not matter much as only a few can figure out that unlike Sensex, the rupee going up is not positive news, but on the contrary, it actually means rupee is becoming weaker. Many wrongly think that if rupee goes up it is something good for them not realising when the Indian currency depreciates against any foreign currency it has many negative impacts from the economic point of view.
What is RBI, Structure of RBI, Function of RBI(Traditional/Promotional/Supervisory), Economic Policies, Monetary Policies, CRR, SLR, RRR, LAF, MSF, OMOS
In India, commercial banks are the oldest, largest and fastest growing financial intermediaries. They have been playing a very important role in the process of development. In 1949 RBI was nationalized followed by nationalization of Impearl Bank of India (New State Bank Of India) in 1995.
Financial sector is treated as to be the back bone of the economy. The quality in the working of financial sector truly impacts the profitability of the banks which as a whole impacts the economy and GDP of a country. Thus, it is important to explore the impact of reforms on the profitability of Indian banks. The paper focuses on the impact of reforms on profitability of Indian banks. This research will evolve the performance of financial institutions only after 1998 and in the wake of Narsimham Committee II.
The study is micro economic in nature and seeks to analyze the productivity of banking systems. Here an attempt has been made to examine the impact of reforms. The impact of reforms on the profitability of Indian banks has been examined on the basis of following parameters: Interest income to total assets, Operating Profit to Total Asset, Return on Asset and Return on Advances. More importantly such analysis is useful in enabling policymaker to identify the success or failure of policy initiative or alternatively highlight different strategies undertaken by banking firms which contribute to their success. Here an attempt has been made to examine the impact of banking reforms on profitability of Indian banking industry.
GROWTH PHASE IN INDIAN BANKING SECTOR
In over five decades since dependence, banking system in India has passed through five distinct phase, viz.
(1) Evolutionary Phase (prior to 1950)
(2) Foundation phase (1950-1968)
(3) Expansion phase (1968-1984)
(4) Consolidation phase (1984-1990)
(5) Reformatory phase (since 1990)
this is the presentation on repo & reverse repo (the repo & reverse repo rates are current rates which are given when this presentation was uploaded,the rates may change according)pls do not refer this rates as its fluctuating
Repo rate is the rate at which the central bank of a
country (Reserve Bank of India in case of India) lends
money to commercial banks in the event of any
a shortfall of funds. Repo rate is used by monetary
authorities to control inflation
What is RBI, Structure of RBI, Function of RBI(Traditional/Promotional/Supervisory), Economic Policies, Monetary Policies, CRR, SLR, RRR, LAF, MSF, OMOS
In India, commercial banks are the oldest, largest and fastest growing financial intermediaries. They have been playing a very important role in the process of development. In 1949 RBI was nationalized followed by nationalization of Impearl Bank of India (New State Bank Of India) in 1995.
Financial sector is treated as to be the back bone of the economy. The quality in the working of financial sector truly impacts the profitability of the banks which as a whole impacts the economy and GDP of a country. Thus, it is important to explore the impact of reforms on the profitability of Indian banks. The paper focuses on the impact of reforms on profitability of Indian banks. This research will evolve the performance of financial institutions only after 1998 and in the wake of Narsimham Committee II.
The study is micro economic in nature and seeks to analyze the productivity of banking systems. Here an attempt has been made to examine the impact of reforms. The impact of reforms on the profitability of Indian banks has been examined on the basis of following parameters: Interest income to total assets, Operating Profit to Total Asset, Return on Asset and Return on Advances. More importantly such analysis is useful in enabling policymaker to identify the success or failure of policy initiative or alternatively highlight different strategies undertaken by banking firms which contribute to their success. Here an attempt has been made to examine the impact of banking reforms on profitability of Indian banking industry.
GROWTH PHASE IN INDIAN BANKING SECTOR
In over five decades since dependence, banking system in India has passed through five distinct phase, viz.
(1) Evolutionary Phase (prior to 1950)
(2) Foundation phase (1950-1968)
(3) Expansion phase (1968-1984)
(4) Consolidation phase (1984-1990)
(5) Reformatory phase (since 1990)
this is the presentation on repo & reverse repo (the repo & reverse repo rates are current rates which are given when this presentation was uploaded,the rates may change according)pls do not refer this rates as its fluctuating
Repo rate is the rate at which the central bank of a
country (Reserve Bank of India in case of India) lends
money to commercial banks in the event of any
a shortfall of funds. Repo rate is used by monetary
authorities to control inflation
Impact of election 2014 on indian stock marketsnehastocktips
Today Report is Specially about Of stock market. Take a look dont miss the special chance in this election session. Our flexible and affordable packages are specially designed for our traders, so that they can choose services as per their requirement. We specially provide STOCK, NCDEX ,MCX trading TIPs via SMS service. Join Us Today.
MONETRY POLICY PPT IN THIS PPT EVERYTHING IS EXPLAIN ABOUT THE MONETRY POLICY TOPIC WISE EASILY LEARN AND EXPLAIND THE DATA IS TAKEN BY RESERVE BANK SITE OR WORLD BANK WEBSITE. YOU CAN EASILY UNDERSTAND HOW RBI WORKS .
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdf
Repo Rate and It's effect on Indian Economy
1. EFFECTS OF REPO RATE ON
INDIAN ECONOMY
PRESENTATION BY
ANIRUDH DAGA
ROLL NO :- 274
ST.Xavier’S College
2. To understand RBI`s Function and role played by it in the Indian Economy
To understand the Concept of Repo Rate and Reverse Repo.
To elaborate the use of Repo Rate by RBI for control purpose
To establish relationship between Repo rate and :-
Inflation & Interest Rates
GDP Growth
Foreign Exchange Price
Fiscal Deficit
To study how effectively Repo Rate has been used in Indian Economy.
3. Method of data collection:-
Secondary sources:-
The data for study has been collected from various sources:
Books
Journals
Internet sources
Statistical Tools Used:
Simple tools like bar graphs, tabulation, line diagrams have
been used.
4. The Reserve Bank of India (RBI) is India's central banking institution, which
controls the monetary policy of the Indian rupee. It was established on 1 April
1935 during the British Raj in accordance with the provisions of the Reserve
Bank of India Act, 1934. The share capital was divided into shares of ₹100
each fully paid which was entirely owned by private shareholders in the
beginning. Following India's independence in 1947, the RBI was nationalized
in the year 1949.
1.1 FUNCTIONS OF RBI :-
Monetary Authority
Regulator and supervisor of the financial system
Manager of Foreign Exchange
Issuer of currency
Developmental role
Related Functions
5. CONTROLLER OF
CURRENCY
ISSUES CURRENCY
NOTES.
CHECKS FAKE
CURRENCY AND
ENSURE THAT IT IS
NOT REDISTRIBUTED.
IS THE OWNER OF
CURRENCY CHEST
1.1.2 BANKERS BANK
BANKERS BANK
REGULATES AND
ENSURES
STABILITY.
CONTROLS
VOLUMES OF
THEIR RESERVES
(SLRs and CRRs).
EXTENDS CREDIT
FACILITIES TO
BANKS.
6. LENDER OF THE LAST
RESORT
RAISE DEPOSITS AND
BORROW MONEY TO
MEET COMMITMENTS.
BORROWING AGAINST
GOVERNMENT
SECURITIES.
MERGING WEAK
BANK WITH STRONG
BANKS TO ENSURE
LONG TERM GROWTH.
1.1.4 BANKERS TO GOVERNMENT
BANKERS TO
GOVERNMENT
MANTAINS
ACCOUNTS OF
VARIOUS
MINISTRIES.
ISSUER OF
SECURITIES.
SHORT TERM
CREDIT TO
GOVERNMENT.
7. SUPERVISING
AUTHORITY/REGULATOR
AND SUPERVISOR
ADVICES
GOVERNMENT FOR
SALE AND PURCHASE
OF SECURITIES.
REGULATES THE
BANKS AND NBFCs IN
INDIA.
ADVICES GOVT. ON HOW
MUCH INTEREST IS TO BE
ALLOWED ON SHORT/LONG
TERM CREDIT.
1.2 MONETARY POLICY
A Tool used to influence Interest rates, Inflation and credit availability through changes in
supply of money available in the economy .
1.2.1 Expansionary policy
Expansionary policy increases the total supply of money in the economy used to combat
unemployment in a recession by lowering interest rates,
1.2.2 Contractionary policy
Contractionary policy decreases the total money supply involves raising interest rates in
order to combat inflation increasing interest rates slows the economy by making funds
more expensive to firms, and promotes consumer savings which decreases revenues by
firms.
8. 1.3.1 Bank Rate :-
1.3.2 Call Rate :-
1.3.3 CRR :-
1.3.4 SLR :-
1.3.5 Repo (Repurchase) Rate
Repo rate is the rate at which banks borrow funds from the RBI to meet the gap
between the demand they are facing for money (loans) and how much they have on
hand to lend.
1.3.6 Reverse Repo Rate :-
The rate at which RBI borrows money from the banks (or banks lend money to the RBI)
is termed the reverse repo rate. The RBI uses this tool when it feels there is too much
money floating in the banking system.
9. Liquidity adjustment facility 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. Repo
or repurchase option is a collaterised lending i.e. banks borrow money from Reserve
bank of India to meet short term needs by selling securities to RBI with an agreement to
repurchase the same at predetermined rate and date. The rate charged by RBI for this
transaction is called the repo rate. Repo operations therefore inject liquidity into the
system. Reverse repo operation is when RBI borrows money from banks by lending
securities. The interest rate paid by RBI is in this case is called the reverse repo rate.
Reverse repo operation therefore absorbs the liquidity in the system
The introduction of Liquidity adjustment facility in India was on the basis of the
recommendations of Narsimham committee on banking sector reforms. In April 1999,
an interim LAF was introduced to provide a ceiling and the fixed rate repos were
continued to provide a floor for money market rates.
10. 2.1.3 What Does Basis points means??
2.1.4 Types of repo rate:-
Over night repos
Term repos
Open repos
2.1.5 Determinants of repo rate :-
Credit quality
Delivery
Collateral Availability
Current rates.
The way in which changes in the repo rate affect inflation and the rest of the economy is
known as the transmission mechanism. The transmission mechanism is actually not
one but several different mechanisms that interact. Some of these have a more or less
direct impact on inflation while others take longer to have an effect. It is generally held
that a change in the repo rate has its greatest impact on inflation after one to two years.
12. If the interest rate rises, banks choose to decrease their lending and instead buy
bonds.
Companies find it more difficult to borrow money.
Companies that are either unable or unwilling to borrow must cut back their
activities, postpone investment and so on, and this dampens activity in the
economy.
2.2.2 Interest Rate Channel :-
When Repo Rate increases.
Banks lend from RBI at a higher rates of interest
They lend it to the borrowers at a high rate of interest
As lending interest rate increases, borrowing of money decreases.
13. Banks unable to borrow at repo rate
Increase in the deposit interest rate to attract depositors.
2.2.3 Exchange Rate Channel:-
When Repo Rate increases.
Interest Rate Increases
Make Indian assets more attractive than investments denominated in other
currencies
Results in a capital inflow and increased demand for Rupees Which strengthens
the Exchange Rate.
Fall in exports & increase in imports
Lower Import Prices & Reduction in demand
Lower Inflation.
14. 3.1 Repo Rate Vs. Inflation :-
9.88
6.00
4.88
7.257.25
8.90
11.70
10.90
8.30
6.40
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
11 -1210-1109-1008-0907-08
Repo Rate (%) (annual Average)3
Inflation
Last 5 year comparison of Repo rate and Inflation
17. FII stands for Foreign Institutional Investment. Here we want to show how high inflation
or inflamatory conditions are unfavourable for FII's and discourage them to invest in
such conditions.
Suppose a foreign investor wants to invest in Indian Economy. He has $100000 to
invest in Indian market. At the time of investment exchange rate was 50/$. So his gross
amount of investment in Indian currency ( INR) is 50 lakhs. During the year he earns
Rs100000 as profit which brings his gross investment at the year end to Rs 51 lakhs.
This picture is bright from the investor's point of few given the exchange rate remains
constant. But due to inflation it turns out that the exchange rate is now 55/$. Now if he
wants to withdraw his money from Indian market . Gross amount he will get is $ 92727
which means he incurred a loss of $ 7273 within a year in Indian market. Thus we see
the gain in Indian currency is outcast by loss due to foreign currency fluctuation and
discouraging FII's to invest in high inflation conditions. The same can be shown with the
help of an bar graph
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Initial outflow final inflow
Series2
Series1
Here series 1 is his
money before and
after investment and
series 2 represents
loss suffered by him.
18. Decrease in Repo rate
Increase in money supply in
economy
Increase in Demand of goods
in economy
Increase in GDP Growth
Rate
Increase in the Average
income of people and
corporate
Increase in Tax Revenue of
the government
Decrease in fiscal deficit of
the government for the
period
Decrease in Repo rate
Decrease in Value of
domestic currency
Increase in Exchange Rate
Increase in Export of goods
Increase in inflow of foreign
currency
Decrease in Current Account
Deficit
20. Date - 17th April 2012 , RBI reduces Repo rate by 50 bps.
6.1 Background
Indian economy affected by the downturn in growth all over the globe was suffering
from macroeconomic problems like high inflation, slow growth rate and high Current
Account Deficit. First of all the countries included in “BRICS” to face the downturn in
growth was seen as the sign of the coming slow growth period or the end of the much
talked about double digit growth expectation. Facing the high inflation problem RBI had
raised the lending rate 13 times between March’10 to October 2011 to contain the
inflation which was touching double digits. This had led to clamor by industry to cut
rates and spur industrial and economic growth that has slowed down considerably
during the past few quarters. And with CAD hovering over 4% of GDP , the economy
was facing a downgrade in investment ranking risk from many investment ranking
institutions.
21. The Reserve Bank of India (RBI) cut interest rates for the first time in three years by an
unexpectedly sharp 50 basis points to give a boost to flagging economic growth but
warned that there is limited scope for further rate cuts. The RBI cut its policy repo rate
to 8%, compared with market and expert expectations for a 25 basis point cut. It also
warned that India's current account deficit, which widened to 4.3% of GDP in the
December quarter, is "unsustainable" and will be difficult to finance given projections of
lower capital flows to emerging markets in 2012.RBI left unchanged the cash reserve
ratio (CRR), the share of deposits that banks must hold with the central bank, at
4.75%, in line with expectations, after cutting it by 125 basis points since January to
ease tight market liquidity.
Reserve Bank Governor D Subbarao said liquidity conditions are moving towards
normal after several months of acute shortage of cash in the banking system, but also
said the RBI would take "appropriate and proactive" steps if needed to restore liquidity
to comfortable levels.
22. SIDDHARTHA ROY, ECONOMIC ADVISER, TATA GROUP, MUMBAI :-
"The 50 bps point rate cut is most welcome. But going ahead, two things are crucial.
First we need more rate cuts to the tune of around 150 bps in order to make the real
interest rates realistic. Then, the fiscal side needs to be controlled to prevent crowding
out of the private sector and available liquidity is well distributed.“
NITESH RANJAN, CHIEF ECONOMIST, UNION BANK, MUMBAI :-
"A very bold step indicating RBI's change in stance. This will help in arresting growth
going below the trend level. One can expect the cost of fund and capital going
down, which will encourage consumption and investment demand.
"Given the inflationary risks, as mentioned in its (RBI's) macro report, I think the next
rate action may wait till first quarter review in July, by when more clear trend on growth
and inflation will emerge.“
GAURAV KAPUR, SENIOR ECONOMIST, ROYAL BANK OF SCOTLAND
NV, MUMBAI :
"I think perhaps another 25 basis points in the first half of this year is likely. I think
the room for further cuts is limited. The actual action is to support growth without
taking eyes off inflation.
"One comfort factor for the RBI is core inflation, which has fallen below 5
percent, which shows the demand side pressures are easing."
23. The summary of the analysis and situation case study can be drawn as follows:-
Repo Rate and inflation are inversely related. That is a decease in Repo Rate leads to
increase inflation. Both the economic factor are closely related to each other and Repo
rate has a great influence over the inflation rate.
Repo Rate and foreign exchange rate also share a inverse relationship between them. As
increase in Repo rate leads to strengthening of domestic currency and thus leading to fall
in exchange rate due to strengthening of domestic currency.
Repo Rate and GDP of a country are inversely related. That is if repo rate decreases the
GDP of an country increases. This is because of increase in money supply in economy
leading to increase in demand of goods in economy. Thus resulting in increase in GDP.
Repo Rate has a positive Relationship with Fiscal Deficit. Though both are not related
directly by the relationship is based on two factors which are affected by Repo rate as
shown earlier in the analysis part.
Reserve Bank of India (RBI) being the apex bank of the country plays an important role
in the economy. As depicted in earlier section it has many functions in the economy
ranging from being the banker to the banks to taking decisions regarding monetary
policies. RBI uses Repo rate as a tool for controlling money supply in the economy and
also to bring the inflation and other factors under control. And the situation case study
shows the effectiveness of the policies relating the repo rate and its utilization as a
monetary tool for controlling the money supply.
24. Repo Rate which is a very well-known term in our economy plays a vital role in it. From
affecting the inflation directly to influencing the foreign exchange rate, repo rate plays a
central role in the money supply of an economy. The findings of the analysis done earlier are
a proof of how important repo rate is for the economy and how effectively it is used by RBI in
the context of Indian economy. The same is also shown with the help of the views of some of
the experts of Indian financial market. Thus we can conclude that Repo rate being a small
term has a multiplying effect on the economy.
Limitations of the study:-
Though inflation is directly affected by Repo rate but repo rate is not the only factor
affecting inflation. Other factors like oil and petroleum prices also have an impact on
inflation. While doing the analysis the same has been ignored and thus this assumption
may not hold good in reality.
GDP of a country is affected by several factors and not only repo rate. So to establish a
relationship between the two we have to assume that Repo rate is the only factor
affecting GDP.
In the case of foreign exchange rates and fiscal deficit also we have assume that all
other factors affecting these two terms doesn’t exist. Thus the assumption may not hold
good in reality
For the purpose of analysis, data used are real and not imaginary hence while showing
the relationship it may happen that the relationship may not hold good. This is due to the
assumptions as said earlier points.
All data used in the project are secondary data as the project mainly deals with
macroeconomic factor and collection of primary data is not possible at the moment and
also due to the constraint of time collection of secondary data is not possible