QUANTITATIVE MEASURES OF HDFC BANK & DEFINITION

(CRR, SLR, REPO RATE, REVERSE REPO RATE, MSF RATE, BANK RATE)

Cash Reserve Ratio(CRR)

The Reserve Bank of India (RBI) requires banks to keep a portion of their deposits in cash so
that it can be supplied to customers in an emergency. The Cash Reserve Ratio is the amount of
cash that must be held in reserves in relation to a bank's overall deposits. The cash reserve is
either held in the bank's vault or sent to the Reserve Bank of India. Under the CRR requirements,
banks do not receive any interest on money held by the RBI.
Unlike the Statutory Liquidity Ratio, or SLR, which can be maintained in gold or currency, the
Cash Reserve Ratio, or CRR, must only be maintained in cash.
In India, the Cash Reserve Ratio is determined by the Monetary Policy Committee of the
Reserve Bank of India (RBI) in its periodic Monetary and Credit Policy. Every six weeks, the
Reserve Bank of India conducts a monetary policy review, which includes a review of the CRR.
The CRR is one of the RBI's key weapons for maintaining a targeted level of inflation,
controlling the money supply, and ensuring liquidity in the economy. The lower the CRR, the
more liquidity there is in the banking system, which leads to increased investment and lending,
and vice versa. Higher CRR may have a negative effect on the economy because it reduces the
supply of loanable funds, which delays investment.
CRR rate in India is- 3.5% as of today but will increase to 4% by may 22nd
CRR rate of HDFC bank is- 3.0% till March 26th 2021

Statutory Liquidity Ratio(SLR)

The Reserve Bank of India (RBI) uses the statutory liquidity ratio as a monetary policy
instrument to determine the liquidity available to banks. SLR mandates that banks invest a
certain percentage of their assets in various federal and state government securities.
As per RBI, liquid assets may be maintained in cash, or in gold valued at a price not exceeding
the current market price, or Unencumbered investment in approved securities.
The term "approved securities" refers to securities issued by the central government or any state
government, as well as other securities that the RBI can specify from time to time. The SLR
status of securities issued by the Government of India and state governments is determined by
the RBI.
Current SLR rate in India is- 18%
SLR rate of HDFC bank is- 3.0%
Repo Rate
In the event of a liquidity crunch, the Reserve Bank of India loans money to commercial banks at
the repo pace. Monetary authorities use the repo rate to monitor inflation.
The term "repurchase option" or "repurchase agreement" is used in banking to describe the repo
rate. When there is a cash shortage, commercial banks borrow money from the central bank,
which is then repaid at the applicable repo rate. These short-term loans are provided by the
central bank in exchange for securities such as Treasury bills or government bonds. The central
bank uses this monetary policy to regulate inflation or raise bank liquidity. When the government
has to regulate prices and limit borrowing, it raises the repo rate. When there is a need to inject
more capital into the economy to promote economic development, on the other hand, the repo
rate is reduced. An rise in the repo rate means commercial banks must pay more interest on
money lent to them, and thus a shift in the repo rate affects public borrowings like home loans
and EMIs. Various financial and investment instruments are indirectly based on the repo rate,
from interest paid by commercial banks on loans to returns on deposits.
Current Repo rate in India is- 4%
Repo rate of bank is- 4.40%

Reverse Repo Rate

This is the pace at which a country's central bank compensates its commercial banks for storing
excess funds in the central bank. The RBI also uses a monetary policy known as the reverse repo
rate to monitor the flow of money in the economy. When a country's central bank needs
liquidity, it borrows it from commercial banks and pays interest at the reverse repo rate. The
reverse repo rate issued by RBI is usually lower than the repo rate at any given time. While the
repo rate is used to monitor cash flow in the market, the reverse repo rate is used to regulate
liquidity in the economy. When the economy is experiencing inflation, the RBI raises the reverse
repo rate to allow commercial banks to deposit money with the central bank and earn interest. As
a result, surplus funds are absorbed from the economy, reducing the amount of capital available
for public borrowing.
Current Reverse Repo Rate is- 3.35%
Reverse Repo Rate of bank is- 4.0%

Marginal Standing Facility Rate (MSF Rate)

The Reserve Bank of India's Marginal Standing Facility allows banks to borrow funds from the
RBI in emergency situations when their liquidity is fully depleted. This short-term borrowing
scheme allows scheduled banks to obtain funds from the Reserve Bank of India (RBI) overnight
in the event of a severe cash shortage by presenting authorised government securities. Banks
often experience liquidity shortages as a result of a financial gap created by a mismatch in
deposit and loan portfolios. Such shortfalls do not last long, and banks may reach the RBI for
one-day cash within the limits of the Statutory Liquidity Ratio to deal with such emergencies
(SLR).
Current MSF Rate in India is- 4. 25%
MSF Rate of HDFC Bank is- 4.65%

Bank Rate
The bank rate is the interest rate at which the central bank lends money to commercial banks.
Commercial banks' lending rates are influenced by bank rates. Higher bank rates would result in
higher bank lending rates. The central bank will raise the bank rate in order to reduce liquidity,
and vice versa.
Current Bank Rate in India is- 4.25%
Bank Rate of HDFC Bank is- 4.65%