September 26, 2022

Learn about Banks board bureau and CRR, Repo rate and Reverse repo rate here

Economic scenarios in India are regulated and monitored by financial institutions of the nation. However, hardly any of you know what these financial institutions’ names are. Only one that many of us are aware of is the RBI (Reserve bank of India). But apart from this there are other financial institutions in our nation. Some of them are like Banks board bureau, SEBI and many mothers. 

We know that you have heard about banks and many of you also appeared in different banking exams to make your future. Remember that banks are an important part in running the national economy and country’s economic cycle. They are the one that deals with the CRR repo rate reverse repo rate. In this guide, we are highlighting some key information related to the Banks board bureau and reverse repo, CRR, and the repo rate.

What is meant by the Banks board bureau?

In the year 2016, there was a banking bureau body constituted called the banks board bureau. The government considered it as a major step in reforming public sectors and general banks. By setting up this body, the government will be revamping general banking sectors in India. The Banks Board Bureau gained more popularity in 2019 because our country was celebrating 50 years of bank nationalization. 

It is a bureau body for the banking sector that develops and implements appropriate methodologies for extending the tenure, appointing or terminating public sector bank board members, financial institutions, and several insurance companies coming under the government’s authority.

Another function of this bureau body is that it engages with all public sector’s banks’ board of directors to come up with different growth and development strategies for national banks. As there are several challenges in front of the public sector banks, the bureau builds their capacities and formulates some relevant growth ideas to create a good environment for our banking sector.

What is Repo Rate?

When you require some money, you approach banks and apply for the loan. Banks provide you the loan at a certain rate of interest and we consider them as a cost of credit. 

But banks also do not own the entire wealth and they borrow at some interest rate from the RBI which is a federal bank of India. This rate is called the repo rate and these borrowing amounts are of lesser duration that is upto 2 weeks. 

In simpler words, banks borrow some amount to meet their daily obligations, and the RBI lends them at a repo rate. The reverse of this repo rate is reverse repo rate in which RBI turns the borrower and commercial banks across the nation are lenders.

CRR: Explained in a nutshell

The Cash Reserve Ratio or CRR is an essential monetary tool. It determines the regulation process of the liquidity or the cash that helps in running the economic cycle of our nation smoothly. There is a certain CRR provided to each commercial bank by RBI. This implementation is possible because of the monetary policy of the Reserve Bank of India Act, 1934. The range that we know of CRR is between 3% to 15%.

If we talk about the Feb 2020, the CRR stood to 4%. While preparing for banking exams, you must have a good command over these terminologies. 

 

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