International Financial Markets: Exchange Rates, Interest Rates and Inflation Rates.
Interest Rates,Money Supply & Inflation
-
Upload
guestee7da63 -
Category
Education
-
view
2.290 -
download
1
description
Transcript of Interest Rates,Money Supply & Inflation
Presented by :- Pankaj Sharma & Nishant Reddy (KIAMS, Harihar)
Tools used by RBI to control the money market:Repo rate : the rate at which banks borrow money from RBI.
Reverse Repo rate :-RBI increases Repo Rate to reduce liquidity.-Financial markets tighten and there is an increase in yields
of securities. Banks tie interest rates to these yields.- Increase in lending and deposit rates. Less spending
Bank Rate : is the ROI which RBI charges on the loans and advances it extends to commercial banks and other financial intermediatories.
CRR(Cash Reserve Ratio): It is the bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are made to satisfy withdrawal demands and would normally be in the form of flat currency stored in bank vault or in Central Bank.
SLR (Statutory Liquidity Ratio): It is the amount which a bank has to maintain in form of cash, gold or approved securities. The quantum is specified as some percentage of total demand and time liabilities(i.e. the liabilities of the bank which are payable on demand at any time, and those liabilities which are approving in one month’s time due to maturity).
•Current policy ratesBank rate: 6Repo 7.50Reverse repo : 6
•Reserve ratiosCRR: 5.5SLR: 24
•Lending/deposit ratesPLR: 12.75-13.25Savings bank rate:3.5Deposit rate: 7.5-9.6%
Monetary policy - Management of money supply and interest rates by central banks to influence prices and employment
Types of monetary policy:•Inflation targeting•Price level targeting•Monetary aggregates•Fixed exchange rate•Gold standard•Mixed policy
India follows the INFLATION TARGETING
What RBI is trying to Balance?
• Liquidity in the system
•Inflation Rates
•Exchange Rates