Almost all the IBPS interviews will be conducted aroud a series of bank knowledge based questions. In this article I will explain the most basic 3 bank terms .
Understand the terms first and then prepare yourself by speaking about these terms. Try speaking aloud what these terms are about. This practice will definitely help you to perform well without any tension in the bank interview.
1. What is a Repo Rate?
Repo rate at which normal banks borrow money from the reserve bank of India. All the banks in India have the provision to borrow money from the RBI if ever any type of necessity comes.Reserve bank uses this rate as a means of controlling the monetary value.If the Repo rate is decreased it means that banks can now borrow money from the reserve bank at lesser percentage. Hence more banks will borrow money.
Similarly if the Repo rate increases the normal banks will not borrow money from reserve bank easily.
2. What is Reverse Repo Rate?
Reverse Repo rate is the opposite of Repo rate. In fact in this case reserve bank borrows money from the normal banks.You may think does reserve bank need money? Reserve bank borrowing money from the banks is to ensure that the balance of money is maintained in the country. If suppose there is more money floating around the banking industry, reserve banks increases the Reverse Repo rate. So what happens is more banks will be happy to lend money to reserve bank.In this situation, banks earn good money from the reserve bank and RBI maintained the financial situation.
3. What is CRR Rate?
Cash reserve ratio is the fixed amount of money the banks are supposed to keep with the reserve bank of India.This money value is decided by the Reserve bank considering the situation. If suppose reserve bank feels that there is too much money with the banks, Reserve bank can increase the CRR rate making the banks to deposit more money with the RBI.So CRR is also a means of monetary regulation tool of the Reserve bank of India.
So if you have any doubts regarding these 3 terms post your comments below. Make sure that you understand these 3 basic terms first.This is the foundation of banking knowledge.
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