How Do Bank Works Know about CRR SLR REPO RATE

In this Post, i am going to share how  do Bank works actually.  After going through this post one Can really understand about CRR, SLR, REPO RATE, REVERSE REPO RATE

Son: I have heard recently that Mr Urjit Patel has reduced Repo Rate by 50 basis points and everyone is saying that this is good for the market. Loan EMI may also come down. What is this rate cut means actually? I want to understand this.
Dad: To understand this you first need to know, how does a bank function. How Do Bank Works.
Son: Why?
Dad: Because all these are inter-related. Tell me – what does a bank do?
Son: Bank takes money from depositors and gives the loan to earn interest. That way they keep everyone happy and make a profit also.
Dad: Correct, but there are more to it. Let me explain this in a very simplistic way. The bank needs money. Bank can get money from depositors like you and me and also from RBI. But the bank also needs to pay certain interest to us and also to RBI.
Son: Ok.
Dad: Let us try to understand first – what happens when we deposit, say, Rs. 100 with a bank.
Son: I know that. Bank gives that Rs. 100 to someone who needs a loan.
Dad: No, it is not that simple. Remember, though the bank can earn interest by giving away loans, but it is also very risky. There are many cases of loan defaults. This way banks can put all our money into high-risk areas. It has to be protected.
Son: How?
Dad: Ok, RBI has made it mandatory that upon receiving, say, Rs. 100 – banks first have to deposit Rs. 4 with RBI. RBI keeps this Rs. 4 in its current a/c and hence banks do not receive any interest on this money. This is known as Cash Reserve Ratio or CRR, which is currently at 4%.
Son: Hmmm, then? Continue reading “How Do Bank Works Know about CRR SLR REPO RATE”

Pradhan Mantri Garib Kalyan Deposit Scheme

Pradhan Mantri Garib Kalyan Deposit Scheme PMGKDS-2016

1. What is Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016?

It is a scheme notified by the Government of India on December 16, 2016 which is applicable to every declarant under the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

2. Who is eligible to deposit in PMGKS?
The deposit shall be made by any person who declares undisclosed income under sub-section (1) of section 199C of the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

3. In what form will the deposits under this scheme be held?
The Deposits shall be held at the credit of the declarant in Bond Ledger Accounts (BLA) maintained with RBI. Continue reading “Pradhan Mantri Garib Kalyan Deposit Scheme”

How Urjit Patel Differ From Raghuram Rajan

As We all know both Urjit Patel and Raghuram Rajan are experts in their respective fileds. Urjit patel is known as one of the best economist in the world while Raghuram rajan is one of the best banker in the world. one is considered as the hawk on inflation while other is unbeatable in the filed of banking and its regulations known for exposing the figure of npa of indian psu banks.

The Difference between Raghuram Rajan and Urjit Patel.

Academics Difference.

Rajan has completed his B.Tech from IIT, PGDBM from IIM and PhD from MIT Sloan School of Management where he wrote a thesis, ‘Essays on Banking’. Thus, Rajan changed gears and moved towards Economics and Finance. He has a strong hold over Banking, Economics and Corporate Finance.
Patel’s Alma mater is entirely from Foreign Schools. Unlike Rajan, he is a pure Economist and a Finance guy. He obtained his Bachelor’s in Economics from the London School of Economics , M. Phil. degree from Oxford University and doctorate in Economics from Yale.
Professional Roles Continue reading “How Urjit Patel Differ From Raghuram Rajan”