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Date : January 30, 2012 The Reserve Bank of India's third quarter review of monetary policy was devoid of major surprises. The only change in monetary policy instruments — a cut in the Cash Reserve Ratio (CRR) by 0.50 percentage point to 5.5 per cent — was largely expected. The move will release Rs.32,000 crore of funds impounded from banks, almost immediately. The key policy interest rate, the repo rate, remains unchanged at 8.5 per cent. Consequently, the reverse repo stays at 7.5 per cent and the marginal standing facility at 9.5 per cent. A cut in the repo rate would have more definitely indicated a downward shift in the monetary stance but the RBI has argued that the CRR reduction is the best it could do under the prevailing circumstances and ought to be interpreted as a signal for a softer monetary policy regime. According to the RBI, the CRR is a policy instrument with liquidity dimension. Its reduction will bring down the cost of money for banks and have a...

Counterfeit notes that are not easily identified sometimes drives us into tight corners. Not all of us have the ‘currency knowledge’ to find the difference, which can be known only after minute scrutiny. Here is how you can recognize it: See if the note is crisp and thin. The notes are printed on optical fiber paper. Fake notes are printed on thick paper make of bamboo pulp. If it is a Xeroxed note the colour and print look faded. Look for the ‘Intaglio” on the denomination i.e.1000,500,100,50 20 ,10 or 5 ( the embossed print that enables the blind to touch and know the denomination of the currency). The chemical’omran’ is used to print in ‘Intaglio’ which looks bright. Intaglio will be missing in counterfeit notes. Look at the note against the light, for the fine and shining ‘security band’on the right side of ‘Intaglio’ look for the faint water mark For a genuine currency note, the number panel will be regular and when scrutinized against ultra violet rays,the letters printed ...

Bank Rate Bank rate is the rate at which RBI lends to the commercial banks and other financial intermediaries. Bank rates imply a long term outlook on the interest rates and are an outcome of a long term monetary policy. It is the bank rate based on which the commercial banks decide the lending rates to the customers. Hence, any change in the bank rates have direct bearing on the lending rates to the customers. This does not require Security Deposit. Repo Rate (RR) The rate at which Reserve Bank lends money to Banks. Bank borrows money from Banks by submitting securities. submitting securities is a requisite for Repurchase Transaction (Repo transaction). Reverse Repo Rate (RRR) The rate at which Reserve Bank borrows money from Banks. Usually Both the rates are increased or decreased by same basis points.  When Repo rate is increased, borrowing money from RBI gets costlier for Banks and hence Banks increases  lending interest rate. This decreases lo...

What is NEFT? National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme,  individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme. Are all bank branches in the country part of the NEFT funds transfer network? For being part of the NEFT funds transfer network, a bank branch has to be NEFT- enabled.The list of bank-wise branches which are participating in NEFT is provided in the website of Reserve Bank of India at RBI Who can transfer funds using NEFT? Individuals, firms or corporates maintaining accounts with a bank branch can transfer funds using NEFT. Even such individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However, such cash...

1. What is RTGS System? The acronym 'RTGS' stands for Real Time Gross Settlement , which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time.'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable. 2. How RTGS is different from National Electronics Funds Transfer System (NEFT)? NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receiva...