Tag: money and banking

When banks want to borrow long term funds from RBI, bank rate is the interest rate which RBI charges to them. Increase in the bank rate will be useful to control inflation.

It is currently set to 6.75 % (Second Bi-monthly Monetary Policy Statement, 2018–19). The bank rate is not used to control money supply these days.

Interest rate policy relates to the tools used by the central bank (RBI) to change the money supply in the economy.

Thus, it is essentially a part of monetary policy.

Open market operations (OMO) refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system.

All the matters relating to foreign exchange transactions and authorization of dealers are conducted by the Reserve Bank of India.

 In a bid to facilitate seamless banking for all sections of the society, the Reserve Bank of India directed all banks to implement doorstep banking facilities for differently-abled citizens and those above 70 years of age by December this year under Section 23 of the Banking Regulation Act, 1949.

According to the Reserve Bank of India Clearing House, Rules which list the basic guidelines for clearing all types of dues of the clearing house, if any cheque presented to the clearinghouse is returned unpaid for any reason, the banker has to enclose the cheque to a Returning Memo which  records all such transactions when he returns the instrument to the account holder or the customer. 

The loans taken for the purchase of shares and debentures of any company can be sanctioned by any bank against a collateral security of some fully paid equity shares and debentures of some other company in demat form i.e. non materialistic form. 

In order to encourage investment in the country, the RBI may reduce CRR. Reduction in CRR will increase the lending capacity of the banks, leading to higher credit creation which will encourage investment.