The document discusses several important banking concepts:
1) IFSC and MMID codes help identify banks and accounts for online fund transfers using NEFT and IMPS.
2) RTGS allows for real-time large value fund transfers of ₹2-10 lakhs, while IMPS allows instant transfers up to ₹200,000.
3) Core banking solutions allow customers to access accounts from anywhere. CRR and SLR are reserve requirements for banks' deposits and loans. MCLR, repo rate, reverse repo rate, and bank rate are tools for monetary policy and controlling money supply.
The document discusses several important banking concepts:
1) IFSC and MMID codes help identify banks and accounts for online fund transfers using NEFT and IMPS.
2) RTGS allows for real-time large value fund transfers of ₹2-10 lakhs, while IMPS allows instant transfers up to ₹200,000.
3) Core banking solutions allow customers to access accounts from anywhere. CRR and SLR are reserve requirements for banks' deposits and loans. MCLR, repo rate, reverse repo rate, and bank rate are tools for monetary policy and controlling money supply.
The document discusses several important banking concepts:
1) IFSC and MMID codes help identify banks and accounts for online fund transfers using NEFT and IMPS.
2) RTGS allows for real-time large value fund transfers of ₹2-10 lakhs, while IMPS allows instant transfers up to ₹200,000.
3) Core banking solutions allow customers to access accounts from anywhere. CRR and SLR are reserve requirements for banks' deposits and loans. MCLR, repo rate, reverse repo rate, and bank rate are tools for monetary policy and controlling money supply.
The document discusses several important banking concepts:
1) IFSC and MMID codes help identify banks and accounts for online fund transfers using NEFT and IMPS.
2) RTGS allows for real-time large value fund transfers of ₹2-10 lakhs, while IMPS allows instant transfers up to ₹200,000.
3) Core banking solutions allow customers to access accounts from anywhere. CRR and SLR are reserve requirements for banks' deposits and loans. MCLR, repo rate, reverse repo rate, and bank rate are tools for monetary policy and controlling money supply.
• IFSC CODE -Indian Financial System Code (IFSC) is an eleven-character
alphanumeric code that helps in transferring funds online.
• NEFT-NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT)-
It is a secured, economical, reliable and efficient system of funds transfer between
banks. At the time of funds transfer, the remitter has to furnish the necessary details i.e., Name & Account No. of the beneficiary, Name of bank/branch and IFSC Code of the beneficiary branch.
• . What is RTGS ?
• The acronym 'RTGS' stands for Real-Time Gross Settlement. Simply put, it is the process of continuous (real-time) settlement of funds, which occurs individually, on an order by order basis, without netting. In other words, your request to transfer or settle funds is carried out immediately, instead of the same happening in batches (as is the case in NEFT).
• The RTGS system is primarily meant for large value transactions. So, the minimum amount that can be remitted through RTGS is ₹2 lakh per day. The maximum amount is ₹10 lakh per day.
• IMPS: Immediate Payment Service, IMPS is an instant inter-bank
electronic fund transfer service. Using IMPS, you can send money in real- time, and it will be credited to the beneficiary’s account within seconds. While there is no cap on the minimum transfer amount, the maximum amount you can transfer per day via the Immediate Payment Service is INR 200,000.
• MMID-Mobile Money Identifier- is a 7 digit number allotted by your
Bank for receiving funds through IMPS. The bank will allot MMID when you register your mobile number and account number in which you wish to receive funds. If you have more than one account, you will get a separate MMID for each account.
• MICR CODE:-MICR code is a code printed on cheques using MICR
(Magnetic Ink Character Recognition technology). This enables identification of the cheques and which in turns means faster processing. An MICR code is a 9-digit code that uniquely identifies the bank and branch participating in an Electronic Clearing System (ECS).
• Core Banking Solution (CBS) is the networking of bank branches, which
allows customers to manage their accounts, and use various banking facilities from any part of the world. In simple terms, there is no need to visit your own branch to do banking transactions.
• CRR-Under cash reserve ratio (CRR), the commercial banks have to hold a certain minimum amount of deposit as reserves with the central bank. The percentage of cash required to be kept in reserves as against the bank's total deposits, is called the Cash Reserve Ratio.
• SLR Statutory Liquidity Ratio or SLR is a minimum percentage of
deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.
• MCLR (Marginal Cost of Funds Based Lending Rate)
The MCLR is a reference rate or internal benchmark for the financial institution. Marginal cost of funds based lending rate defines the process used to determine the minimum home loan rate of interest. The MCLR method was introduced in the Indian financial system by the Reserve Bank of India in the year 2016. The MCLR system has replaced the base rate system that was introduced in the year 2010. Thus, renewal of credit limits and sanctioning of loans is done as per MCLR norms.
What is a Bank Rate?( 5.15% Current)
• Bank rate is a rate at which the Reserve Bank of India (RBI) provides the loan to commercial banks without keeping any security. There is no agreement on repurchase that will be drawn up or agreed upon with no collateral as well. The RBI allows short-term loans with the presence of collateral. This is known as Repo Rate.
• Repo Rate and Reverse Repo Rate
• Repo rate can be defined as an amount of interest that is charged by the Reserve Bank of India while lending funds to the commercial banks. The word ‘Repo’ technically stands for ‘Repurchasing Option’ or ‘Repurchase Agreement’. Both the parties are required to sign an agreement of repurchasing which will state the repurchasing of the securities on a specific date at a predetermined price. The repo rate in India is controlled by the Reserve Bank of India. (Current Repo Rate 5.40 %)
• Any changes in the repo rates can directly impact the economy. A decrease in the repo rates helps in improving the growth and economic development of the country. A decline in the repo rate can lead to the banks bringing down their lending rate which is beneficial for retail loan borrowers.
• Reverse Repo Rate( 3.35 %)
• The reverse repo rate is the rate of interest that is provided by the Reserve bank of India while borrowing money from the commercial banks. In other words, we can say that the reverse repo is the rate charged by the commercial banks in India to park their excess money with RBI for a short- term period. The current reverse repo rate in India as of May 2022 is 3.35%. Reverse repo rate is an important instrument of the monetary policy which control the money supply in the country.
What is Marginal Standing Facility?( 5.15 %)
• The Marginal Standing Facility (MSF) refers to the facility under which scheduled commercial banks can borrow an additional amount of overnight money from the central bank over and above what is available to them through the LAF (liquidity adjustment facility) window by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit.
• A liquidity adjustment facility (LAF) is a tool used in monetary policy,
primarily by the Reserve Bank of India (RBI) that allows banks to borrow money through repurchase agreements (repos) or to make loans to the RBI through reverse repo agreements.
• Key differences between Repo Rate vs Bank Rate
• Though Repo Rate and Bank Rate have few similarities like both is fixed by the central bank and used to monitor and control the cash flow in the market, they have some prominent differences too. Take a look at the differences between Repo Rate and Bank Rate below.
• Bank Rate is charged against loans offered by the central bank to
commercial banks, whereas, Repo Rate is charged for repurchasing the securities sold by the commercial banks to the central bank.
• No collateral is involved while charging Bank Rate but securities, bonds,
agreements and collateral is involved when Repo Rate is charged.
• Repo Rate is always lower than the Bank Rate.
• Increase in Bank Rate directly affects the lending rates offered to the customer, restricting people to avail loans and damages the overall economic growth, whereas Increase in Repo Rate is usually handled by the banks and doesn’t affect customers directly.
• Comparatively, Bank Rate caters to long term financial requirements of
commercial banks whereas Repo Rate focuses on short term financial needs.
As per the current monetary policy announced on August 05, 2022, the repo rate stands at 4.00% and the reverse repo rate at 3.35%. The marginal standing facility (MSF) rate and the Bank Rate stand at 4.25%. Further the CRR rate and SLR rate stand at 4.50% and 18.00%.
