*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
📌 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!
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