27 January 2009
SIMPLY FOR YOU DEEPAK: RBI HAS NOTIFIED A RATIO OF CASH AND CASH EQUIVALENT THAT HAS TO BE MAINTAINED BY EVERY BANK. A SPECIFIED CASH AND CASH EQUI. AS COMPARE TO THEIR TOTAL ASSETS IS TO BE RESERVED BY EACH BANK.
REPORATE: SAY ONE BANK HAS IDLE FUNDS FOR SOME DAYS. AND ANOTHER BANK IS IN NEED OF FUNDS. THEN IInd BANK WILL APPROACH TO THE FIRST BANK TO LEND THEIR IDLE FUNDS TO THEM AGAINST THE SALE OF SECURITY. AFTER SOME DAYS THE BORROWER BANK WILL REPURCHASE ITS SECURITY FROM THE LENDER BANK. AND AS A CONSIDERATION IT WILL PAY THE LOAN AMOUNT PLUS INTEREST. THIS INTEREST RATE IS KNOWN AS REPO RATE. REPO MEANS REPURCHASE OPTION. AND THE REPORATE IS DECIDED BY THE RESERVE BANK OF INDIA.
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