Post on 30-Jan-2015
description
Bank rates and its implication on Indian economy
The project report deals with the bank rates and its consequences on Indian economy .These rates are form the basis for development of economy directly and indirectly
Research methodology• The research has been done using secondary sources:
1. Internet 2. Fortnight journals 3. Newspapers and magazines..4. Books of senior secondary and graduation to clear
concepts.5. The research has been done and data for various
years has been compared to figure out the current scenario….
6. The focus on basics has been our main objective for having a general idea of what the bank rate is all about…
Objectives • To find out the monetary
and liquidity position of Indian economy..
• To figure out how does it Affects the economy.
• To find out various tools and measures to implement bank rates.
• To understand the concept of money supply and monetary policy.
• To understand inflation.
Bank rates
Monetary policy
Control inflation
Sustain the economy
Process Tree
Concepts• Interest rate charged by country’s
central on loans and advances to control money supply in the economy and banking sector .
Bank rates
• Policy by which central bank controls money supply in the economy, targeting the rate of interest
Monetary policy
• Money stock is total amount of money available at a specific time in the economy
Money supply
• Rise in general price level of G/S in the economy over a period of time .
Inflation
M1 M2 M3 M4
RR,RRR
CRR,SLR
CPI GDP Deflator.WPI
Quantitative, Qualitative
Findings and resultsYear Money
supply
Feb 2008 4060194
Sept 2008 4302878
Dec 2008 4414019
Mar 2009 4670399
July 2009 5028951
Jan 2010 5337566
May 2010 5677067
Due to this decrease in money supply the R.B.I injected liquidity in the market by decreasing
interest rates.
During this period money supply increased at a
decreasing rate reason being the Global turmoil at
this time…..
A more recent scenario
2007 2008 2009 2010 20110
10
20
30
40
Current rates scenario
bank rateRepo rateReverse Repo ratecah reserve ratio
Cash reserve ratio has been constant from the last
year at 6%
Reserve repo rate has increased by 3 percentage
points from 5.25% to 7.25%
Repo rate has increased 2 percentage points from
6.25 % to 8.25%
Bank rate has grown consistently over the
period of five years at 6%Inflation has been the major reason for tightening of interest rates ,affecting the liquidity position in the economy
Findings and resultsIndia Inflation Rate at 8.99 percent.The inflation rate in India was last reported at 9 percent in
August of 2011.Rbi has almost taken 11 hikes in key interest rates in order to control inflation..
Rising inflation and slowing demand would moderate
India's economic growth to 8 per cent during 2011-12 from 8.8 per cent in the previous fiscal, said a
World Bank report
Inflation at peak
Calculations and facts
• The Data for cash reserve ratio (CRR) are as percentage of net demand and time liabilities (NDTL) as per Section 42 of the RBI Act, 1934.
• Till Oct. 28, 2004, nomenclature of Repo indicated absorption of liquidity where Reverse Repo meant injection of liquidity by the Reserve Bank.
• However , with effect from 29 October 2004 nomenclature of Repo and Reverse Repo has been interchanged as per international usages.
• Beginning May 03, 2011 the repo rate became the single independently varying policy rate to single the monetary policy stance.
• The reverse repo rate continues to be operative but it is now pegged
at a fixed 100 basis points below the repo rate and is no longer an independent rate…..
bibliography
• Data has been collected from various sites and various books have been used for clearing of concepts..
1. Wikipedia.org2. Investopedia.com3. Franklintempelton.org.in4. Economictimes.indiatimes.com5. Rbi.org.in
• Books consulted
1. Macro economics concepts-Sp jain2. Macro economics India-Ck Gupta3. Macro economics – TR jain V.K ohri
Our interpretation
• Used as an effective tool to monitor economic growth..
• Used mainly to control money supply
Bank rates
• Determines the total amount of currency floating in the economy.
• Is considered as a major factor for inflation
Money supply • Rise in general price
level
• Affects the economic growth of the country
Inflation
•Group No: 1•Ankit singh karki•Faisal khan•Soumya umesan•Purnadal bagchi•Charu chaudhari
Thank you