Frequently Asked Questions for All Banking Exams

What is a Reverse Repo Rate?

Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. Banks are always happy to lend money to RBI since their money are in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. It can cause the money to be drawn out of the banking system.

Due to this fine tuning of RBI using its tools of CRR, Bank Rate, Repo Rate and Reverse Repo rate our banks adjust their lending or investment rates for common man.

What Is Cash Reserve Ratio And How Will The CRR Hike Impact You?

Cash Reserve Ratio is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank.

The reserve ratio is sometimes used as a tool in monetary policy, influencing the country’s economy, borrowing, and interest rates. Western central banks rarely alter the reserve requirements because it would cause immediate liquidity problems for banks with low excess reserves; they prefer to use open market operations to implement their monetary policy. The People’s Bank of China does use changes in reserve requirements as an inflation-fighting tool, and raised the reserve requirement nine times in 2007. As of 2006 the required reserve ratio in the United States was 10% on transaction deposits (component of money supply “M1″), and zero on time deposits and all other deposits. An institution that holds reserves in excess of the required amount is said to hold excess reserves.

Cash reserve Ratio (CRR) in India is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

What is the meaning of 'statutory liquidity ratio'?

It is the amount which a bank has to maintain in the form of cash, gold or approved securities. it is presently 25%.

What Does Prime Lending Rate Mean?
The interest rate charged by commercial banks to their most creditworthy customers. Generally, a bank's best customers consist of large corporations.

Investopedia explains Prime Rate
Default risk is a major consideration in setting interest rates. Because a bank's best customers have little chance of defaulting, the bank can charge them a rate that is lower than the rate charged to a customer with a higher likelihood of defaulting on a loan.

What Does Bank Rate Mean?
The rate at which central banks lend funds to national banks. 

Investopedia explains Bank Rate
A central bank adjusts the supply of currency within national borders by adjusting the bank rate. When the central bank reduces the bank rate, it increases the attractiveness for commercial banks to borrow, thus increasing the money supply. When the central bank increases the bank rate, it decreases the attractiveness for commercial banks to borrow, consequently decreasing the money supply. 

 

What is a Repo Rate?
		Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. 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.

Why Sri Krishna committee formed? May 6th, 2011   Just a day before completing the deadline for giving its recommendations on the Telangana issue, the B N Srikrishna committee presented its report to the government on December 30 2010 , hoping it would show a way forward. The Union government has decided to call political parties of Andhra Pradesh on January 6 to discuss the contents and hold detailed discussions on law and order. It is expected the government will make the report public soon, after the discussions. “We have given the way forward,” said Vinod K Duggal, the panel’s member-secretary, soon after the report was given to Home Minister P Chidambaram. Not giving out any details of the two-volume report, retired justice B N Srikrishna said the home minister would first convene the meeting of all political parties. The committee members have also spoken to political parties and leaders from Andhra Pradesh and have asked them to help maintain law and order once the report is made public. Interestingly, all political parties have assured cooperation on this. “You pose all your questions to the government now,” Srikrishna said after meeting the home minister. The Union government had asked the committee members to consult all sections of the people, especially political parties, industry, trade, trade unions, farmer organisations, women’s organisations and students’ organisations. More Info About  Sri Krishna Committee. Sri Krishna Committee was being set up on pursuant to the “statements made on December 9, 2009 and December 23, 2009 and the meeting with the eight recognized political parties of Andhra Pradesh on January 5, 2010.” Government of India after holding consultations with eight recognized political parties on the telangana issue has set up the Sri Krishna Committee to study the current situation in Andhra Pradesh on February 3. Sri Krishna Committee was formed to study the political and social issues that are plaguing the state of Andhra Pradesh. The main purpose of Sri Krishna committee is to give suggestions and recommendations on the demand for separate state of telangana. Sri Krishna Committee started taking opinions from all quarters of public on the topics of United Andhra, Telangana and Hyderabad. Committee has requested to send public opinion to Sri Krishna committee at vkduggal.ccsap@mha.gov.in . Committee also suggested public to send there opinions through post and phone (011-21022330) Fax (011-23022444). But the committee informed public that the suggestions are accepted till April 2010. Mails are requested to the following address Member Secretary Room No. 248, Vignan Bhavan Annexe, Maulana Azad Road, New Delhi Sri Krishna Committee is headed by the former Supreme Court judge of India, Justice B.N. Sri Krishna. The other members of Sri Krishna committee are (Professor Dr. Ranbir Singh, Vice-Chancellor, National Law University) (Dr. Ms Ravinder Kaur, Professor, Department of Humanities and Social Sciences, IIT, Delhi), (Dr. Abusaleh Shariff, Senior Research Fellow, International Food Policy Research Institute, Delhi) (Vinod K. Duggal, former Home Secretary, who will also function as its Member-Secretary. Mr. Duggal is also a member of the Justice Punchhi Commission on Centre-State relations. The following are the seven-point Terms of Reference of the Sri Krishna Committee: (1) To examine the situation in the State of Andhra Pradesh with reference to the demand for a separate State of Telangana as well as the demand for maintaining the present status of a united Andhra Pradesh. (2) To review the developments in the State since its formation and their impact on the progress and development of the different regions of the State. (3) To examine the impact of the recent developments in the State on the different sections of the people such as women, children, students, minorities, other backward classes, scheduled castes and scheduled tribes. (4) To identify the key issues that must be addressed while considering the matters mentioned in items (1), (2) and (3) above. (5) To consult all sections of the people, especially the political parties, on the aforesaid matters and elicit their views; to seek from the political parties and other organizations a range of solutions that would resolve the present difficult situation and promote the welfare of all sections of the people; to identify the optimal solutions for this purpose; and to recommend a plan of action and a road map. (6) To consult other organizations of civil society such as industry, trade, trade unions, farmers’ organisations, women’s organisations and students’ organisations on the aforesaid matters and elicit their views with specific reference to the all round development of the different regions of the State. (7) To make any other suggestion or recommendation that the Committee may deem appropriate. India's Population 2011 Current Population of India in 2011 1,210,193,422 (1.21 billion) Total Male Population in India 623,700,000 (623.7 million) Total Female Population in India 586,500,000 (586.5 million) Sex Ratio 914 females per 1,000 males Age structure 0 to 25 years 50% of India's current population Currently, there are about 51 births in India in a minute. India's Population in 2001 1.02 billion Population of India in 1947 350 million

Where is the headquarter of IMF?

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