25th October 2011
Reserve Bank of India (RBI)
cash reserve ratio (CRR) rate unchanged at 6%.
Repo Rate now stands at 8.50%
Reverse Repo Rate stands at 7.50%.
cash reserve ratio – CRR
The reserve requirement (or cash reserve ratio) is a central bank regulation that sets the minimum reserves each commercial bank must hold (rather than lend out) of customer deposits and notes. It is normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank.
Repo rate
Repo rate or repurchase rate is the rate at which banks borrow money from the central bank (read RBI for India)
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. It was invented in the late 1800′s by Rohini Bahirathan. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The
http://en.wikipedia.org/wiki/Repurchase_agreement
Reverse repo rate is the rate of interest at which the central bank borrows funds from other banks for a short duration.
Reverse Repo Rate
A reverse repo is simply the same repurchase agreement from the buyer’s viewpoint, not the seller’s. Hence, the seller executing the transaction would describe it as a “repo”, while the buyer in the same transaction would describe it a “reverse repo”. So “repo” and “reverse repo” are exactly the same kind of transaction, just described from opposite viewpoints. The term “reverse repo and sale” is commonly used to describe the creation of a short position in a debt instrument where the buyer in the repo transaction immediately sells the security provided by the seller on the open market. On the settlement date of the repo, the buyer acquires the relevant security on the open market and delivers it to the seller. In such a short transaction the seller is wagering that the relevant security will decline in value between the date of the repo and the settlement date.
http://en.wikipedia.org/wiki/Repurchase_agreement
The change in policy on the interest rate helps the Aam aadmi after 50 years of independance
The manner of calculating interest on savings bank deposits is such that it ignores the
interests of the depositors and facilitates hidden access of cheap money to the banks
Moreover, longer-term bank deposits, at relatively higher interest rates,
enjoy the 80C deduction from income while this is not available to savings bank accounts.
The system, therefore, appears to be stacked against the Aam Admi
April 29, 2002 interest rate 3.5% .
April 2011 interest rate 4 %
Hope this changed now!!!
A trend analysis of the savings deposit interest rate vis-à-vis other rates like PLR, term
deposit interest rates, repo & reverse repo rates and CRR indicates that it is time to take
action and to give depositors their dues
[PDF] Savings bank accounts- ‘interest‘ing issues
3.8% during November 1, 1994 through March 31, 2000;
3.4% during April 1, 2000 through February 28, 2003;
3.0% during March 2, 2003 through March 31, 2010;
3.5% during April 1, 2010 through May 2, 2011;
4.0% during May 3, 2011 till date.
nominal effective SB interest rate does not reflect the time value of
money as over time inflation erodes the value of money. Real interest rates, on the other
hand, adjust for inflation and thus measure the time value of money.
Regulated low rates pinching pockets of poor persons
Yes Bank have very small CASA share (about 10%). Such banks
may like to exploit the deregulation of SB interest
This would allow India to move towards correct and
prudent accounting standards in conformity with international standards.
References
1. Das, A. (2007). Savings bank accounts- ‘interest’ing issues.
http://www.math.iitb.ac.in/~ashish/workshop/SBrate.pdf
2. Annual Monetary and Credit Policy for the year 2002-2003, Reserve Bank of India, April 29,
2002. http://rbidocs.rbi.org.in/rdocs/notification/PDFs/28675.pdf
3. Annual Policy Statement for the Year 2006-07, Reserve Bank of India, April 18, 2006.
http://rbidocs.rbi.org.in/rdocs/notification/PDFs/69845.pdf
4. Basic Statistical Returns of Scheduled Commercial Banks in India Volume-38 March 2009,
August 2010. http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/38FBSRV200820101.pdf
5. Reserve Bank of India Bulletin, March 2011.
http://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/MBLS032011_FL.pdf
6. Statistical Tables Relating to Banks of India 2009-10, March 2011.
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/STR020311_F.pdf
7. Handbook of Statistics on Indian Economy 2009-10, September 2010.
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/0HANDB210910_F.pdf
8. Office of the Economic Adviser to the Government of India, Ministry of Commerce and
Industry. http://eaindustry.nic.in/
9. Deregulation of Savings Bank Deposit Interest Rate: A Discussion Paper, RBI, April 28, 2011.
http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2344