...Targeting a rate of interest to attain objective of growth and stability of the economy. TYPES OF MONETARY POLICIES Expansionary • Increases the total supply of the money in the economy • Used to combat unemployment in a recession by lowering interest rates TYPES OF MONETARY POLICIES Contractionary • Decreases the total supply of the money in the economy • Used to combat inflation by raising interest rates TOOLS OF MONETARY POLICY IN INDIA Cash Reserve Ratio (CRR) Statutory Liquidity Ratio (SLR) Repo and Reverse Repo Rate CASH RESERVE RATIO (CRR) • Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank • RBI uses CRR either to drain excess liquidity or to release funds needed for the economy from time to time. STATUTORY LIQUIDITY RATIO (SLR) • SLR is the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. REPO AND REVERSE REPO RATE REPO RATE • It is the rate at which the RBI lends shot-term money to the banks. When the repo rate increases borrowing from RBI becomes more expensive. REVERSE REPO RATE • It is the rate at which banks park their short-term excess liquidity with the RBI. The RBI uses this tool when it feels there is too much money floating in the banking system. PURPOSE OF REPO AND REVERSE REPO RATE • Repo rate and reverse repo are...
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...The Reserve Bank of India (RBI) is the nation’s central bank fundamental commitment to maintaining the nation’s monetary and financial stability. From ensuring stability of interest and exchange rates to providing liquidity and an adequate supply of currency and credit for the real sector; from ensuring bank penetration and safety of depositors’ funds to promoting and developing financial institutions and markets, and maintaining the stability of the financial system through continued macro-financial surveillance, the Reserve Bank plays a crucial role in the economy. Our decisions touch the RBI at a Glance Managed by Central Board of Directors India’s monetary authority Supervisor of financial system Issuer of currency Manager of foreign exchange reserves Banker and debt manager to government Supervisor of payment system Banker to banks Maintaining financial stability Developmental functions Research, data and knowledge Sharing Central Board of Directors by the Numbers Official Directors 1 Governor 4 Deputy Governors, at a maximum Non-Official Directors 4 directors—nominated by the Central Government to represent each local board 10 directors nominated by the Central Government with expertise in various segments of the economy 1 representative of the Central Government 6 meetings—at a minimum—each year 1 meeting—at a minimum—each quarter Monetary Authority Issuer of Currency Banker and Debt Manager to Government Banker to...
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...What is Banking Ombudsman (BO)? * He hears customers’ complaints against banks. * BO was first setup in UK. * In India, RBI started this scheme in 1995. Appointment & Tenure * Earlier RBI used to appoint reputed persons from banking, finance, management, legal etc. sectors as Banking Ombudsmen (BO). * But now RBI has reserved this BO post for its own Chief General Managers and General Managers. * Tenure: 3 years at a time. * Reappointment: yes possible. Jurisdiction * Banking Ombudsman (BO) Scheme applies to whole of India (including Jammu and Kashmir). Banking Ombdusmen have jurisdiction over 1. All commercial banks (scheduled and non scheduled, public and private) 2. Regional rural banks 3. scheduled primary co-operative banks 4. NBFCs (BO’s Jurisdiction limited to “loan” part.) * BO is not a replacement of Consumer forum/courts. He merely supplements them. * BO deals with matters less than or equal to Rs.10 lakhs. * Here are some examples situation where BO can help you: Regular banking 1. Demand draft, cheques, pay orders etc. not issued on time. (or not paid on time) 2. Credit card related complaints (e.g. bank putting hidden charges. Your credit card was stolen but bank did not disable it even after you called them.) 3. You asked the bank to close your account / credit card but they are not doing it. 4. Bank refuses to open your account without giving valid reasons. 5. Bank closes down your account without valid...
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...Policy rates and reserve ratios |Policy Rates, Reserve Ratios, Lending and Deposit Rates as of July 15, 2014 | |Bank Rate |9.00% | |Repo Rate |8.00% | |Reverse Repo Rate |7.00% | |Cash Reserve Ratio (CRR) |4% | |Statutory Liquidity Ratio (SLR) |22.00% | |Base Rate |10.00%–10.25% | |Savings Deposit Rate |4% | |Term Deposit Rate |8.00%–9.5% | Bank rate RBI lends (no collateral required for long term lendings) to the commercial banks through its discount window to help the banks meet depositor’s demands and reserve requirements for long term. The interest rate the RBI charges the banks for this purpose...
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...Monetary Policy of Bangladesh Lecture Synopsis: 2 NSU, MBA Program Dr. Salehuddin Ahmed(Sld) BUS 530 (Section – 1 & 2); SPRING, 2013 Introduction Both in developed and developing economies, monetary policy seeks to maintain price stability accompanied by sustained stable output growth in the face of internal and external shocks that are faced from time to time. For developing economies like Bangladesh with significant underemployment/under exploitation of production factors, stimulating higher growth is imperative for rapid reduction and eventual elimination of endemic poverty, and is therefore an overriding priority. The stimulus provided by monetary policy in accommodating the growth aspirations must not however jeopardize macroeconomic stability and future growth; and the pursuit of monetary policy comprises of various supportive measures to attain the highest sustainable output growth while adjusting smoothly to internal and external shocks that the economy encounter from time to time. History and Objectives of Bangladesh Monetary Policy Objectives of the monetary policy of the Bangladesh Bank as outlined in the Bangladesh Bank Order, 1972 comprise of attaining and maintaining of price stability, high levels of production, employment and economic growth. In the decades of seventies and eighties, monetary policy in Bangladesh was conducted with full direct control on interest rates and exchange rates, as also on the volumes and directions of credit flows...
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...RBI – The Reserve Bank of India is the apex bank of the country, which was constituted under the RBI Act, 1934 to regulate the other banks, issue of bank notes and maintenance of reserves with a view to securing the monetary stability in India. Demand Deposit – A Demand deposit is the one which can be withdrawn at any time, without any notice or penalty; e.g. money deposited in a checking account or savings account in a bank. Time Deposit – Time deposit is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term. Fixed Deposits – FDs are the deposits that are repayable on fixed maturity date along with the principal and agreed interest rate for the period. Banks pay higher interest rates on FDs than the savings bank account. Recurring Deposits – These are also called cumulative deposits and in recurring deposit accounts, a certain amounts of savings are required to be compulsorily deposited at specific intervals for a specified period. Savings Account – Savings account is an account generally maintained by retail customers that deposit money (i.e. their savings) and can withdraw them whenever they need. Funds in these accounts are subjected to low rates of interest. Current Accounts – These accounts are maintained by the corporate clients that may be operated any number of times in a day. There is a maintenance charge for the current accounts...
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...Reforms in the Indian Monetary Policy During 1990s The Monetary policy of the RBI has undergone massive changes during the economic reform period. After 1991 the Monetary policy is disassociated from the fiscal policy. Under the reform period an emphasis was given to the stable macro economic situation and low inflation policy. The major changes in the Indian Monetary policy during the decade of 1990. 1. Reduced Reserve Requirements : During 1990s both the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR) were reduced to considerable extent. The CRR was at its highest 15% plus and additional CRR of 10% was levied, however it is now reduced by 4%. The SLR is reduced form 38.5% to a minimum of 25%. 2. Increased Micro Finance : In order to strengthen the rural finance the RBI has focused more on the Self Help Group (SHG). It comprises small and marginal farmers, agriculture and non-agriculture labour, artisans and rural sections of the society. However still only 30% of the target population has been benefited. 3. Fiscal Monetary Separation : In 1994, the Government and the RBI signed an agreement through which the RBI has stopped financing the deficit in the government budget. Thus it has seperated the Monetary policy from the fiscal policy. 4. Changed Interest Rate Structure : During the 1990s, the interest rate structure was changed from its earlier administrated rates to the market oriented or liberal rate of interest. Interest rate slabs...
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...Human Resource Accounting Human Resource Accounting (HRA) means to measure the cost and value of the people (i.e. of employees and managers) in the organisation. It measures the cost incurred to recruit, hire, train and develop employees and managers. HRA also finds out the present economic value of its employees and managers. After measuring the cost and value of its employees and managers, the organisation prepares a report. This report is called HRA Report. It is shown to the top level management. It can also be shown to the employees, managers and outside investors. Methods of HRA There are many different methods of HRA, some of which are:- 1. Actual Cost Method, 2. Replacement Cost Method, 3. Standard Cost method, etc. Advantages of HRA Benefits, objectives, advantages of human resource accounting HRA:- 1. Information for manpower planning HRA provides useful information about the cost and value of human resources. It shows the strengths and weakness of the human resources. All this information helps the managers in planning and making the right decisions about human resources. Thus HRA provides useful information for Manpower Planning and Decision Making. 2. Information for making personnel policies HRA provides useful information for making suitable personnel policies about promotion, favourable working environment, job satisfaction of employees, etc. 3. Utilisation of human resources HRA helps the organisation to make the best utilisation of human...
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...country by mobilizing surplus funds and utilizing them effectively for productive purpose. The financial system is characterized by the presence of integrated, organized and regulated financial markets, and institutions that meet the short term and long term financial needs of both the household and corporate sector. Both financial markets and financial institutions play an important role in the financial system by rendering various financial services to the community. They operate in close combination with each other. Financial System; |[pic] | The word "system", in the term "financial system", implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three terms are intimately related yet are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation Role/ Functions of Financial System: A financial system performs the following functions: * It serves as a link between savers and investors. It helps in utilizing the mobilized savings of scattered savers in more efficient and effective manner. It channelises flow of saving into productive investment. * It assists in the selection of the...
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...NAME Page no Introduction Introduction Rational of the study 01 Objective of the study 02 Scope of the study 02 Methodology of the study 02 Limitations of the study Chapter- 01 01 02 Body of the term paper Monetary Policy Reason of publishing 04 Types of Monetary Policy 05 Monetary Policy in Bangladesh 06 Tools & Strategy of Monetary Policy 06 Major tools used by Bangladesh Bank 07 Policy Target 12 Limitations of Monetary Policy 13 Findings of the study Chapter-03 03 Scope & Objective of Monetary Policy Chapter- 02 03 14 Conclusion 14 Bibliography 14 Chapter- 01 Introduction “Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment. Monetary theory provides insight into how to craft optimal monetary policy. It is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it. Expansionary policy is traditionally used to try to combat unemployment in a recession by loIring interest rates in the hope that easy credit will entice businesses...
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...on # Macro-Economices (Course Code: FIN-2209) 14th February, 2011 ►Prepared by, Anik Ahmed BBA, 3rd Batch, Department Of Finance Jagannath University, Dhaka. Capital Market Overview A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year. The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators, such as the Bangladesh Bank (BB), and Securities and Exchange Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. Capital Market Primary Market Secondary Market In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere. In Bangladesh there are two capital markets in our country. One is Dhaka Stock Exchange (DSE), and another is Chittagong Stock Exchange (CSE). History of capital market in Bangladesh: The Dhaka Stock Exchange (DSE) was setup on 28th April, 1954 that started formal trading on early 1956. Post independence government did not promote a capital market during the first five years, and it was activated again in 1976 with...
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...Y V Reddy: Fiscal policy and economic reforms Address by Dr Y V Reddy, Governor of the Reserve Bank of India, at the National Institute of Public Finance and Policy (NIPFP), New Delhi, 26 May 2008 (edited transcript). * * * Respected Professor Govinda Rao and distinguished scholars, I am honoured by my friend, Prof. Govinda Rao’s, kind invitation to me to visit the National Institute of Public Finance and Policy (NIPFP). I had the opportunity of working very closely with the NIPFP on several occasions. Apart from my personal affinity to the NIPFP, there is a close relationship between the Reserve Bank of India (RBI) and the NIPFP, from an institutional point of view also. For instance, Prof. Govinda Rao is a Member of the Southern Local Board of RBI. Initially, I thought of speaking on fiscal policy and economic reforms from a central banker’s perspective. I realised later that while I have been working as a central banker over the last one decade, I had worked for most parts of the three decades prior to that in the Ministry of Finance, in the Government of India as well as in the Government of Andhra Pradesh. So it was a difficult choice for me as to whether I should give a fiscal view of the monetary policy or a monetary view of the fiscal policy. I have worked for a short period in the World Bank, which gives a global governments’ view and also in the IMF, which gives a global monetary authority’s view. As a via-media, I have opted to give a practitioner’s perspective...
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...CAR This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors. SLR- Statutory liquidity ratio It is the amount of liquid assets, such as cash, precious metals or other approved securities, that a financial institution must maintain as reserves other than the cash with the Central Bank. The statutory liquidity ratio is a term most commonly used in India. The maximum and minimum limits for the SLR are 40% and 25% respectively in India CRR-Cash Reserve Ratio The reserve requirement (or cash reserve ratio) is a central bank regulation that sets the minimum reserves each commercial bank must hold (rather than lend out) of customer deposits and notes. It is normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank. The CRR ratio in india is 6% Repo Rate Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. Current Repo Rate in India is 8.5% Reverse Repo Rate Reverse...
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...Introduction A liquidity crisis may be created in the banking sector due to its over-reliance on domestic borrowing for implementing the annual development programme. If the government borrows hugely for implementing the ADP, the industrial sector will not get enough loans from the banking system, which will ultimately lead to a higher bank interest rate. The government is planning to borrow from banks of Tk 18,957 crore for meeting the deficit and spending in different sectors. The growth of the industrial sector will be hampered if the government does not stop borrowing from banks. Due to government borrowing banking sector is facing a great amount of liquidity crisis in the recent years. Liquidity crisis results in various problems to the economy. it rises interest rate, hinders economic growth, decreases confidence of banking people. So, it is one of the major responsibilities of the Bangladesh Bank to make proper steps to control liquidity crisis. What is liquidity? Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money in the form of cash is the most liquid asset. Assets that generally can only be sold after a long exhaustive search for a buyer are known as illiquid. High liquidity means there is a lot of capital because interest rates are low, and so capital is easily available. Interest rates are very important in controlling liquidity. What Does Liquidity Crisis Mean? Liquidity crisis indicates a negative financial situation characterized...
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...Banks typically make money by borrowing and lending. They borrow from people who want to deposit and from that deposit they lend money to other who want to borrow to make home or factory. Liquidity is essential in all banks to compensate for expected and unexpected Balance Sheet fluctuations and to provide funds for growth. Commercial or conventional banks are required to hold a sufficient proportion of their assets in the form of relatively riskless instruments for monetary control purposes. (To hold reserve assets, and to maintain their reserve asset ratio). Historically, Central Banks’ changed the level of minimum reserve requirements to directly affect levels of liquidity and the price of short-term funds. Normally, the source of liquidity of conventional banks is deposits. Almost in all conventional banks there are some regulations about how to use these deposits. About eighteen and half percent of this deposit is used for cash reserve required (CRR) and statutory liquidity reserve (SLR) which is called statutory reserve as whole. SLR is like fixed deposit. Rest of that deposit which is almost eighty one and half percent is used in investment. Banks lend to people from this money. But there is a policy which is called Advance Depository Ratio which permits to lend 80% of that deposit. Banks generally give three kind of lending, retail finance which has interest rate of about 17%. They also give corporate loan which has interest rate of about 14%- 16% and SME ( small media...
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