A Presentation on

Study of Govt .
Moves :
Change in Key
Economic Rates
Presented By
Raveesh Grover ( 1350
Ravneet Kaur ( 1352 )
MBA II B
Introduc
tion
The major economic rates, which influence any
economy include the CRR Rate, Repo Rate
Reverse Repo Rate, Bank Rate and SLR .During
the conditions of excess demand or deficient
demand, the government changes these rates in
order to increase or decrease the money supply.
 WHAT IS CRR ?
•CRR Stands for Cash Reserve Ratio
•CRR is the amount of Funds that the banks have to
keep with RBI
•If RBI decides to increase the % of CRR, the
available amount with the banks comes down.
•It is a tool used by the RBI to control liquidity in the
banking system.
 

Rate Date
15
10
15
586.50
2500
..50
00 08
13
08
14
24 10
03
06---11 1992
1999
08---2008
04
05 2007
1994

Latest CRR rate 5.00%

 WHAT IS REPO RATE?
•When the banks are having Shortages of Funds,
they borrow it from RBI.
•Repo Rate is the Rate at which banks borrow
money from RBI.
•Low Repo Rate means banks are getting cheaper
rate loans from RBI.
•When Repo Rate increases, borrowing from RBI
becomes more expensive
Rate Date
8.00 5710
96..50
25
00
.00
9.00 28-03-2002
06-
11
30
0702
31
29 --10
2000
06
03
07
-01
--2006
2000
2004
2008
-2009
Latest Repo Rate 5 . 00 %
 WHAT IS REVERSE REPO RATE?
•Reverse Repo rate is the rate at which RBI borrows
money from banks.
•Banks lend the money to RBI for safeguarding the
money with good amount of interest .
•An increase in Reverse repo rate can cause the
banks to transfer more funds to RBI due to the
attractive interest rates. It can cause the money to
be drawn out of the banking system.

Rate Date
546512
7.750
..00
25
50
.00 0226
10-01
-10- -
30 07-10
2005
2009 -20
2000
-04
-2002
25
02
-09
-07
2001
-2000
-2006
Latest Reverse Repo
 WHAT IS SLR?
•SLR stands for Statutory Liquidity Ratio
•Statutary Liquidity Ratio(SLR) is percentage of
deposits the bank has to maintain in form of gold,
cash or other approved securities.
•It is determined by the RBI in order to control the
expansion of credit.

RATE EFFECTIVE DATE

34.25 25.00
20
27..00
32
37 00
50 20-08-1994
25-10
16
2408
06
21 --1997
03
04
07
08
-12
--1993
1970
1985
-
1949
1973

Latest SLR Rate 24 . 0 %

 WHAT IS BANK RATE?
•This is the rate at which central
bank ( RBI )   lends money to other
banks or financial institutions .
•If the bank rate goes up , long - term
interest rates also tend to move up .
Date Bank Rate
22
15
16
30
--Jul
-Nov
Apr
Oct
-2-2000
-1951
1997
Jan
2002-1900 11
386..50
00
00
25
1.00

Latest Bank Rate 6.0%

 Literature
Review
Author’s Name Year Findings
Frenkel and Taylor 2006 studied that the exchange rate affects
any economy through many channels and
managing the exchange rate necessarily
encompasses monetary and expectation
considerations.
Bhaumik and 2007 observed amount of credit disbursed in an
Majumdar economy depends on the willingness of
banks to lend and on the willingness of
companies and individuals to borrow.

Bhattacharya 2008 investigated the relationship between

inflation and the exchange rate in the
post reform period in India.
Jalan 2008 studied that India needs to cut interest
rates further as two reductions in less
than a month haven’t been enough to make
loans affordable for companies and
consumers.
Mitra 2008 said that an interest rate hike was the
right tool to ‘cool the economy`.
 Need , Scope and
Objectives of the
Study
Need of the
Study
•This research will enable to cover the gap identified
from the review of literature .
•The need of the study has arisen to have more insight
vision into the government ’ s actions to influence the
availability , cost of money and credit in the economy .
•To observe and analyze the various trends prevailing
in economic rates which affect the growth or decline in
aggregate demand , money supply and ultimately the
control of inflation or deflation .
•
 Scope of the
The Study
scope of the study is limited to
Jalandhar city only .
bjectives of the Study
tudy was conducted in order to achieve the following objective
tudy the impact of changing economic rates on business units .
tudy the influence of changes in economic rates on interest ra
ompare the economic rates of India with world market .
tudy the impact of changing economic rates on banking sector .
tudy the impact of changing economic rates on common man .
tudy the effect of changing economic rates on liquidity .
 I . RESEARCH DESIGN TOOLS OF ANALYSIS
The research design for
the current researchVarious
was Statistical Tools like Tables and Bar Graphs
descriptive and
conclusion oriented

Research Methodology
II . SAMPLING DESIGN . DATA SOURCES

Theoretical universe : Secondary sources

all the Business houses
of the world universe :
Accessible
includes all the
Business houses of India
Sample Size : 50
Sampling Techniques :
non-probability random
convenience sampling
Magazines , websites,
newspapers and journals
Primary
sources
survey through questionnaire
which included both open- ended
and close-ended questions.
DATA ANALYSIS AND
INTERPRETATION
STATEMENT 1: Awareness regarding the current economic crisis
STATEMENT 2: Impact of the economic crisis on Business
STATEMENT 3: Ranking the measures to combat recession

Measures to combat recession Summated Score Rank

Increase in taxes 109 2nd

Pump Priming 152 4th

Increase in Public expenditure 144 3rd

Changes in key economic rates 95 1st

Responses are based on importance score 1 st

being most important and 4 th being least
important .
STATEMENT 4: Awareness regarding the action government has
taken to combat the economic crisis
STATEMENT 5: Perception of customers regarding benefit of the
rate cut by RBI
STATEMENT 6: The extent of difficulty in getting additional bank
limit
STATEMENT 7: Reduction of interest rates by banks
STATEMENT 8: The current interest rates are competitive as
compared to World market
STATEMENT 9: The perception of people about the current
situation of the economy after the steps taken by the government
STATEMENT 10: Prediction of growth rate of year 2009 as
compared to year 2008
 STATEMENT 11 : Respondents agreement to 5 -
point likert scale
Serial number Statements Summated score
11.1 The changes made in economic rates were essential to 209
tackle the present economic situation.

11.2 The changes in the economic rates are beneficial to the 131
banking sector.

11.3 The changes in the economic rates are beneficial to the 153
business.

11.4 The common man is getting the benefits of these 127

changes.

11.5 The steps taken by the government are enough to 91

stabilize the present economic conditions.

11.6 The current changes in the economic rates have had a 133
positive effect on your liquidity position.

11.7 The current changes in the economic rates have had a 130
positive effect on your purchasing power.

11.8 People are satisfied with the role government has 100
played to stabilize the present economic conditions
Maximum score=250
Average score= 150
Minimum score= 50
Conclusion of the
Study
 ommendations of the stu
commendations
•Keeping in view the benefit of all the sectors of the society government should make
the changes in the economic rates.
•
•The government should concentrate on higher credit creation through liquidity
generation.

•To settle down the financial crisis the rates should be further reduced . The interest
rates should be lowered and the bank credit limit should be increased.

•The government should also look up to some other measures like increase in taxes,
pump priming, increase in public expenditure etc to stabilize the economy.
Queries?