Now is the turn for the few rates which many of us are not so sure abut:
1) Repo Rate: repo rate s d rate at which banks borrow money frm RBI. it is meant for short term borrowing. Short term bole toh upto 90 days. It is against securities. Currently it is 7.75%(check on the last day too before going to ur interviews).It is part of LAF(liquidity adjustment facility)
Now how it is used to adjust liquidity into the market or to control inflation.
Let's take an example: agar mujhe RBI se 100Rs. ka loan lena hai toh samajhiye 7.75% interest dena hoga....matlab mile mujhe Rs.92.25......ab agar RBI ne kahiye repo ko badaa ke Rs.8 kar diya toh....mere haath main bacche Rs.92....matlab Rs0.25 kam pehale se......agar yeh crore main hota toh 0.25 crore kam milta.....Means the money which bank is now left with in it's hand is lesser now. So they will be able to invest less now. Or the cost of borrowing has increased and so banks will be borrowing less money. ie they will b able to spend less and hence the liquidity is lessened or reduced. Inflation kam karne ka tarika hai paisa market se absorb karke as people will b left with less money and hence reduced Purchasing power forcing producers to reduce the cost/prices. So iss an inflation control tool.
Reverse Repo: It is just the opposite of Repo rate....means when banks have excess money then they pool it with rbi.....yaa yun keh lejiye ki wen rbi requires loan den it takes from banks at reverse repo rate. Again LAF tool.
Reverse Repo= Repo - 1%, = 7.75% -1% = 6.75%
Same kahaani....agar reverse repo rate high.....toh banks max paisa RBI ke pass pool kar denge aur market main liquidity kam ho jaayegi. Otherwise agar Reverse repo rate kam hoga toh banks paisa apne pass rakhenge aur invest karenge market main leaving the market with more money. agar inflation low hai toh yeh measure use kiya jaata hai inflation normal laane ke liye as less inflation too is very risky for economy. There should always be a balance.
Bank Rate: It s same as Repo rate(concept wise) but is used for long term means for above 90 days.Secondly securities are not required for these long term loans unlike repo.
Base Rate:This s d rate which has replaced BPLR or PLR. PLR bole toh Prime lending rate that banks ka joh ab use naa howe hai........Base rate s d minimum rate below which banks can not give loans. It is decided by banks themselves with the help of few criteria....but hv to notify rbi and hv to keep base rate same for everyone and all d loans unlike PLR.
Cash Reserve Ratio: This is the amount of money which banks have to compulsively maintain with rbi. Again agar RBI CRR increase karti hai toh it means that it wants to reduce money liquidity frm d market as banks will b left with less cash in their hand.usually lies b/w 4-5%
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 securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). agar RBI issey badaa deti hai toh v banks r left wid less money. These r used for liquidity control in the market.
slr bole toh statutory liquidity ratio.....jisme kuch 24-25% paisa in different forms, banks hv to keep with demselves as per d norms f RBI......take an example....maan le bhaiii Rs.100 hain X bank ke pass....ab agar rbi ne slr 24% rakha hai toh.......X ko Rs.24 toh bank ko apne hi pass rakh dene hain(means dey cannt utilise dat money/invest/give loan)...bacche Rs.76....jisko woh invest/loan etc kar/de sakta hai......ab agar rbi ne SLR badaa ke say 25% kar diya...toh bank ke pass bacche sirf Rs.75....matlab pehale se Rs.1 kam....toh market ka potential Rs.1 se kam ho gyaa.....means rbi leessened d liquidity frm market or reduced money....market main paisa kam toh logon ki purchasing power kam, purchasing power kam toh inflation apne aap hi hoga kam....kyunki agar price badenge toh log khariid naa paanvengeeee becaz f less purchasing power....Same applies in case f lowering f SLR...paisa bad jaayega....aur logon ki PP bad jaayegi...toh inflation apne aap badega....Rs.1 yahan chotta lag raha hoga.....but bak ke hazaaron crore hone ki wajah se 50 basis points yaa .50 ke change se v market pe badaa asar padta haiii......hope em clearr...
Beech main aaya inflation ka ek concept V. Kissi ne poocha tha ki aaj excess money se inflation kaise hota hai: Pasting d reply here too as it is relevant to d matter.
excess money se iflation hota hai....anoither example to explain dis..... socho market main sirf aap aur main hun(as a buyer) aur dono ke Pass Rs.100 hain.....dono dukaan pe jaate hain aur saaman kharid ke le aate hain Rs.100 ka...now if u have 110 Rs. and I hv Rs.100 only....aur socho saaman sirf 1 hi reh gya market main(as population f dis country s so high)....fir aap dukaandaar ke pass jaoge aur bologe ki woh saaman aapko hi de aur mujhe naa de.....bhale hi aapse Rs.5 ya 10 jyaada le le....ab mere pass toh Rs.100 hi hain.....toh main kaise khirdunga....dukaan daar Rs.5 jyaada leke aapko de dega saaman...badaa diyaa naa aapne price bcz f hving excess money.....dass inflationnnnn..... 
MSF(Marginal Standing Facility): this is for overnight borrowing from RBI. Almost same as repo but repo overnight nahi hota......MSF s for very short term.....No securities r required as in the case of repo. And MSF s always 1% higher than repo.
Formula:
Repo = Reverse Repo +1%
MSF = Repo + 1%
Reverse repo as on date = 6.75%(check on d last day too before attending ur interviewsas these rates change often now a days)
Post ur queries as comments guys......
Happy Learning
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