How RBI Controls Inflation in India

*Knowledge is Power*

*How RBI Controls Inflation and the Impact of Friday's CRR Cut*

*Did you know?*

*The RBI has four powerful tools to control inflation and drive growth:*

📌 CRR 
📌 Repo Rate
 ðŸ“Œ Reverse Repo Rate 📌 SLR

*Here's how they work in simple terms:*

1) Cash Reserve Ratio (CRR) 

Banks must keep a percentage of deposits with the central bank.

🔼 Higher CRR → Less money for banks to lend → Inflation controlled
🔽 Lower CRR → More money for banks to lend → Growth encouraged

Small changes = Big impact!

2) Repo Rate 

The rate at which the RBI lends to commercial banks.

🔼 Higher Repo Rate → Reduces liquidity → Inflation down
🔽 Lower Repo Rate → Boosts liquidity → Growth up

Central banks adjust this to control the money supply!

3) Reverse Repo Rate 

The rate at which the RBI borrows from commercial banks.

🔼 Higher Reverse Repo → Banks park funds → Liquidity down, inflation controlled
🔽 Lower Reverse Repo → Banks lend more → Liquidity up, growth boosted

It's a balancing act!

4) Statutory Liquidity Ratio (SLR) 

Banks must invest a percentage of deposits in government securities.

🔼 Higher SLR → Less money for lending → Inflation controlled
🔽 Lower SLR → More money for lending → Growth boosted

It's about steering the economy!

Mutual fund investments are subject to market risk. Consult your financial advisor before investing.
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