FM A1,2 Flashcards
RBI Act
1934
FERA ; Replaced by FEMA IN
1947 (Replaced by FEMA 1999)
Banking regulation Act
1949
DICGC full form and year of launch
Deposit Insurance and Credit Guarantee Corporation - 1961
Banking Ombudsman Scheme
1995
Prevention of Money Laundering Act
1992
Credit Information company Act
2005
Government securities act
2006
Payment Settlement Sys Act
2007
MONETARY POLICY features
Effects interest rates, inflation, credit availability via changes in supply of money
The (fixed) interest rate at which the Reserve Bank provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
REPO RATE
The (fixed) interest rate at which the Reserve Bank absorbs liquidity, on an overnight basis, from banks against the collateral of eligible government securities under the LAF
REV REPO
A facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system
MSF
The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.
CORRIDOR
It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. The Bank Rate is published under Section 49 of the Reserve Bank of India 1934. This rate has been aligned to the MSF rate and, therefore, changes automatically as and when the MSF rate changes alongside policy repo rate changes
BANK RATE
The average daily balance that a bank is required to maintain with the Reserve Bank as a share of such per cent of its Net demand and time liabilities (NDTL) that the Reserve Bank may notify from time to time in the Gazette of India
CRR
The share of NDTL that a bank is required to maintain in safe and liquid assets, such as, unencumbered government securities, cash and gold. Changes in SLR often influence the availability of resources in the banking system for lending to the private sector.
SLR
The rate below which bank cannot lend. It was not effective hence RBI has launched MCLR (Marginal cost of fund based lending rate)
BASE RATE
It allows RBI to absorb liquidity from commercial bank without giving government security in return. Here reverse repo is applicable as interest rate. Voluntary facility with bank and allows to handle emergency situations.
STANDING DEPOSIT FACILITY
These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.
OMO
These include both, outright purchase and sale of government securities, for injection and absorption of durable liquidity, respectively.
OMO
This instrument for monetary management was introduced in 2004. Surplus liquidity of a more enduring nature arising from large capital inflows is absorbed through sale of short-dated government securities and treasury bills. The cash so mobilised is held in a separate government account with the Reserve Bank. Money obtained by MSS cannot be used by government and it has to be kept with RBI only.
MSS
PROS OF INFLATION TARGETTING - TIPS
Transparent, Independent, Price stability, Simple & Clear
CONS OF INFLATION TARGETING - ZNTR
Possibility of interest rate touching zero lower bound; Narrow focus on cost stabilization, Lad in policy transmission, Room for inflation rate movement is less
