What is SLR, CRR, REPO, Reverse Repo, and rates?

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Repo rate also known as the benchmark interest rate is the rate at which the RBI lends
money to the banks for a short term. When the repo rate increases, borrowing from RBI
becomes more expensive. If RBI wants to make it more expensive for the banks to
borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks
to borrow money it reduces the repo rate.

Current repo rate is 5.40%.

Reverse Repo rate is the short-term borrowing rate at which RBI borrows money from
banks. The Reserve bank uses this tool when it feels there is too much money floating in
the banking system. An increase in the reverse repo rate means that the banks will get a
higher rate of interest from RBI. As a result, banks prefer to lend their money to RBI
which is always safe instead of lending it others (people, companies etc) which is always
risky. Rate – 3.35%CRR – Cash Reserve Ratio – Banks in India are required to hold a certain proportion of their deposits in the form of cash.

However, Banks don’t hold these as cash with themselves, they deposit such cash (aka currency chests) with Reserve Bank of India, which is considered as equivalent to holding cash with themselves. This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio.

Rate – 4.50%
SLR – Statutory Liquidity Ratio – Every bank is required to maintain at the close of
business every day, a minimum proportion of their Net Demand and Time Liabilities as
liquid assets in the form of cash, gold, and un-encumbered approved securities. The ratio
of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio
(SLR). Rate –18%