query: the rate at which rbi lends money to commercial banks

pos: Bank rate (R Act 1934 sec.49 ) The Reserve Bank of India also provides short term loans to its clients (keeping collateral) at what is called the repo rate. This rate is revised periodically. However, there is no predetermined schedule. The repo rates are changed reactively depending on the economy. As in other countries, repo rates affect the money flow into the nation's economy and affect the inflation and commercial banks' lending or interest rate. The Indian bank rate is 6.75%, which is same as the rate for Marginal Standing Facility. In New Zealand, the Reserve Bank of New Zealand sets the

pos: Money market in India of funds, they can borrow it from Reserve Bank of India or from other banks. The rate at which the RBI lends money to commercial banks is called repo rate, a short term for repurchase agreement. 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.. Money market mutual funds invest money in specifically, high-quality and very short maturity-based money market instruments. The RBI has approved the establishment of very few such funds in India. In 1997, only one MMMF was in operation,

pos: Repurchase agreement it is called a "customer repo". Until 2003 the Fed did not use the term "reverse repo"—which it believed implied that it was borrowing money (counter to its charter)—but used the term "matched sale" instead. In India, the Reserve Bank of India (RBI) uses repo and reverse repo to increase or decrease money supply in the economy. The rate at which the RBI lends to commercial banks is called the repo rate. In case of inflation, the RBI may increase the repo rate, thus discouraging banks to borrow and reducing the money supply in the economy. As of June 2017,

pos: Reserve Bank of India on 8 November 2016. Earlier 1000 notes have been discarded by RBI. Reserve Bank of India also works as a central bank where commercial banks are account holders and can deposit money. RBI maintains banking accounts of all scheduled banks. Commercial banks create credit. It is the duty of the RBI to control the credit through the CRR, bank rate and open market operations. As banker's bank, the RBI facilitates the clearing of cheques between the commercial banks and helps the inter-bank transfer of funds. It can grant financial accommodation to schedule banks. It acts as the lender of the

pos: Reserve Bank of India 2018–19). The bank rate is not used to control money supply these days. Although penal rates are linked to bank rate. If a bank fails to keep SLR or CRR then RBI will impose penalty & it will be 300 basis points above bank rate. Liquidity Adjustment facility was introduced in 2000. LAF is a facility provided by the Reserve Bank of India to scheduled commercial banks to avail of liquidity in case of need or to park excess funds with the RBI on an overnight basis against the collateral of Government securities. RBI accept application for a minimum amount

pos: Scheduled Banks (India) Scheduled Banks (India) Scheduled Banks in India refer to those banks which have been included in the Second Schedule of Reserve Bank of India Act, 1934. RBI in turn includes only those banks in this Schedule which satisfy the criteria laid down vide section 42(6)(a) of the said Act. Banks not under this Schedule are called Non-Scheduled Banks. Every Scheduled bank enjoys two types of principal facilities: it becomes eligible for debts/loans at the bank rate from the RBI; and, it automatically acquires the membership of clearing house. The Scheduled banks comprise Scheduled Commercial Banks and Scheduled Co-operative banks. The

pos: Liquidity adjustment facility Liquidity adjustment facility Liquidity adjustment facility (LAF) is a monetary policy which allows banks borrow money through repurchase agreements. LAF is used to aid banks in adjusting the day to day mismatches in liquidity. LAF helps banks to quickly borrow money in case of any emergency or for adjusting in their SLR/CRR requirements. LAF consists of repo (repurchase agreement) and reverse repo operations. Repo or repurchase option is a collaterised lending i.e. banks borrow money from Reserve bank of India to meet short term needs by selling securities to RBI with an agreement to repurchase the same at predetermined rate

pos: Bank rate (R Act 1934 sec.49 ) The Reserve Bank of India also provides short term loans to its clients (keeping collateral) at what is called the repo rate. This rate is revised periodically. However, there is no predetermined schedule. The repo rates are changed reactively depending on the economy. As in other countries, repo rates affect the money flow into the nation's economy and affect the inflation and commercial banks' lending or interest rate. The Indian bank rate is 6.75%, which is same as the rate for Marginal Standing Facility. In New Zealand, the Reserve Bank of New Zealand sets the

pos: Credit control in India Credit control in India Credit control is an important tool used by Reserve Bank of India, a major weapon of the monetary policy used to control the demand and supply of money (liquidity) in the economy. Central Bank administers control over the credit that the commercial banks grant. Such a method is used by RBI to bring "Economic Development with Stability". It means that banks will not only control inflationary trends in the economy but also boost economic growth which would ultimately lead to increase in real national income stability. In view of its functions such as issuing notes and

pos: Scheduled Banks (India) further classification is as follows: 1. Scheduled Commercial Banks A. Public Sector Banks 21 B. Private Sector Banks 40 Private Banks 21 Local Area Banks 03 Small Finance Banks 10 Payments Banks 06 C. Foreign Banks 45 D. Regional Rural Banks 56 E. Co-operative Banks State Co-operative Banks 20 Urban Co-operative Banks 54 2. Non Scheduled Commercial Banks A. State Co-operative Banks 13 B. District Co-operative Banks 364 C. Urban Co-operative Banks 1494 Scheduled Banks (India) Scheduled Banks in India refer to those banks which have been included in the Second Schedule of Reserve Bank of India Act, 1934. RBI

pos: Money market in India money market. The recommendations of the Sukhmoy Chakravarty Committee on the Review of the Working of the Monetary system, and the Narasimham Committee Report on the Working of the Financial System in India, 1991, The Reserve Bank of India has initiated a series of money market reforms basically directed towards the efficient discharge of its objectives. The bank reduced the ceiling rate on bank advances and on inter-bank call and short-notice money. There has been a significant lowering of the minimum lending rate of commercial banks and public sector development financial institutions from 18% in 1990–91 to 10.5% in 2005–06.

pos: Madhavpura Mercantile Cooperative Bank Rs to the bank agreed to pay back the withstanding amount. In August 2005 the bank disbursed which included 25% of the principal amount and interest at the rate of 3% per annum to its public depositors and other cooperative banks in Rajkot. Till March 2011 there were 1,645 Urban Cooperative Banks registered with the Reserve Bank of India. RBI had received 158 proposals for merging some of these banks and it issued no-objection certificates to 95 of these proposals. Only 6 UCBs had assets greater than . In July 2010 Arjun Modhwadia, an Indian National Congress politician alleged that

pos: Indian black money also said that the process of cash circulation was directly related to corruption in his country impacting the lower classes of society. However, neither Indian banks, nor the Reserve Bank of India (RBI) were adequately prepared for this, resulting in currency shortages up to March 2018 and difficulties for Indian citizens. As per government figures, the number of income tax returns filed for 2016–17 grew by 25 per cent to 2.82 crores (compared to growth rate of 9.9% in the previous year), and the advance tax collections during that period rose 41.8% over the one-year period, as more individuals filed

pos: Cooperative banking 1904 at Thiroor in Tiruvallur District in Tamil Nadu Primary Cooperative Banks which are otherwise known as Urban Cooperative Banks are registered as Cooperative Societies under the Cooperative Societies Acts of the concerned States or the Multi-State Cooperative Societies Act function in urban areas and their business is similar to that of Commercial Banks.They are licensed by RBI to do banking business. Reserve Bank of India is both the controlling and inspecting authority for the Primary Cooperative Banks. Ofek (Hebrew: אופק) is a cooperative initiative founded in mid-2012 that intended to establish the first cooperative bank in Israel. Since the

neg: Reserve Bank of India in the country were non-functional. Sporadic violence was reported in New Delhi, but there were no reports of any grievous injury, people attacked bank premises and ATMs, and a ration shop was looted in Madhya Pradesh after the shop owner refused to accept 500 banknotes. Repo (Repurchase) rate also known as the benchmark interest rate is the rate at which the RBI lends money to the commercial banks for a short-term (max. 90 days). When the repo rate increases, borrowing from RBI becomes more expensive. If RBI wants to make it more expensive for the banks to borrow money, it

neg: Sveriges Riksbank in Memory of Alfred Nobel, which is awarded with the Nobel Prizes at the Prize Award Ceremony in Stockholm, on 10 December, the anniversary of Alfred Nobel's death. The Riksbank has a reputation for innovation among central banks due to implementing policies such as: On 2 July 2009, Sweden's Riksbank was the first central bank in the world to implement a negative interest rate, when it lowered its repo rate (the rate at which a central bank lends short-term money to commercial banks against securities) to 0.25%. This caused its linked overnight deposit rate (the interest commercial banks get for

neg: Reserve Bank of India the opposite of repo rate. Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks. The reserve bank uses this tool when it feels there is too much money floating in the banking system. An increase in the reverse repo rate means that the banks will get a higher rate of interest from RBI. As a result, banks prefer to lend their money to RBI which is always safe instead of lending it to others (people, companies etc.) which is always risky. Repo Rate signifies the rate at which liquidity is injected into the

neg: Open market operation market. When the actual federal funds rate is higher than the target, the Federal Reserve Bank of New York will usually increase the money supply via a repurchase agreement (or repo), in which the Fed "lends" money to commercial banks. When the actual federal funds rate is less than the target, the Fed will usually decrease the money supply via a reverse repo, in which the banks purchase securities from the Fed. The Federal Reserve conducts open market operations with the objective of controlling short-term interest rates and the money supply. These operations fall into 2 categories: Dynamic open market

neg: Bank rate is the rate at which the central bank lends short-term money to the banks against securities. It is more applicable when there is a liquidity crunch in the market. In contrast, the reverse repo rate is the rate at which banks can park surplus funds with the reserve bank. This is mostly done when there is surplus liquidity in the market. The interest rate that is charged by a country's central or federal bank on loans and advances controls the money supply in the economy and the banking sector. This is typically done on a quarterly basis to control inflation

neg: Reserve Bank of India time liabilities that banks must maintain in safe and liquid assets, such as government securities, cash and gold. Here it would be pertinent to mention the gold swap of July 2014. The present SLR is 19.5%. It is defined in Sec 49 of RBI Act of 1934 as the ‘standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase'. When banks want to borrow long term funds from RBI, it is the interest rate which RBI charges to them. It is currently set to 6.75%(Second Bi-monthly Monetary Policy Statement,

neg: Reserve Bank of India increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate. If the repo rate is increased, banks can't carry out their business at a profit whereas the very opposite happens when the repo rate is cut down. Generally, repo rates are cut down whenever the country needs to progress in banking and economy. If banks want to borrow money (for short term, usually overnight) from RBI then banks have to charge this interest rate. Banks have to pledge government securities as collateral. This kind of deal happens through

neg: Liquidity adjustment facility and date. The rate charged by RBI for this transaction is called the repo rate. Repo operations therefore inject liquidity into the system. Reverse repo operation is when RBI borrows money from banks by lending securities. The interest rate paid by RBI in this case is called the reverse repo rate. Reverse repo operation therefore absorbs the liquidity in the system. The collateral used for repo and reverse repo operations are Government of India securities. Oil bonds have been also suggested to be included as collateral for Liquidity adjustment facility. In LAF, money transaction is done via RTGS (Real time

neg: Reserve Bank of India banking system by RBI, whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from the banks. Currently, Reverse Repo Rate is pegged to be 0.25% below Repo Rate. Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger proportion of their resources in liquid form and thus reduces their capacity to grant loans and advances, thus it is an anti-inflationary impact. A higher liquidity ratio diverts the bank funds from loans and advances to investment

neg: Reserve Bank of India in government and approved securities. In well-developed economies, central banks use open market operations—buying and selling of eligible securities by the central bank in the money market—to influence the volume of cash reserves with commercial banks and thus influence the volume of loans and advances they can make to the commercial and industrial sectors. In the open money market, government securities are traded at market-related rates of interest. The RBI is resorting more to open market operations in the more recent years. Generally, RBI uses Direct credit controls in India are of three types: The share of net demand and

neg: Reserve Bank of India have to provide these securities additionally. To curb inflation, RBI increases Repo rate which will make borrowing costly for banks. Banks will pass this increased cost to their customers which make borrowing costly in whole economy. Fewer people will apply for loan and aggregate demand will get reduced. This will result in inflation coming down. RBI does the opposite to fight deflation. Although when RBI reduce Repo rate, banks are not legally required to reduce their base rate. The RBI increased the Repo rate from 6% to 6.25% in June 2018. As the name suggest, reverse repo rate is just

neg: Reserve Bank of India specifically instruct banks not to give loans to traders of certain commodities e.g. sugar, edible oil, etc. This prevents speculations/ hoarding of commodities using money borrowed from banks. Under this measure RBI try to persuade bank through meetings, conferences, media statements to do specific things under certain economic trends. For example, when RBI reduces repo rate, it asks banks to reduce their base rate as well. Another example of this measure is to ask banks to reduce their Non-performing assets (NPAs). In developing countries like India, Monetary Policy fails to show immediate or no results because of below factors: A

neg: Banking in Armenia to $141.6 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $310.3 million. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 19.4%. Banking in Armenia In order to support the sector and increase availability of loans, the Central Bank of Armenia (CBA) started the process of monetary policy easing by systematically lowering the refinancing rate, which decreased by 4.5p.p. down to 6% between 2015-2017. This has pushed banks to revise rates on loans and deposits downwards,

neg: Commercial paper in India amount on Commercial paper transaction was Rs. 28,129 crore. This amount increased to Rs. 48,342 crore on 15 July 2008. Since then, there was substantial increase in the outstanding amount on Commercial paper transactions to the highest level of Rs. 1,28,347 crore until 15 July 2011. This period was largely dominated by the Late-2000s financial crisis. In this period, RBI reduced Repo rate drastically from 9% to 4%. However, Prime rate of commercial banks in India remained rigid at 12%. The discounting rate on Commercial papers was in the range of 6.5% to 10% in October 2010. It is explicit

neg: Open market operation bank uses OMO as the primary means of implementing monetary policy. The usual aim of open market operations is—aside from supplying commercial banks with liquidity and sometimes taking surplus liquidity from commercial banks—to manipulate the short-term interest rate and the supply of base money in an economy, and thus indirectly control the total money supply, in effect expanding money or contracting the money supply. This involves meeting the demand of base money at the target interest rate by buying and selling government securities, or other financial instruments. Monetary targets, such as inflation, interest rates, or exchange rates, are used to

neg: Direct finance Direct finance Direct finance is a method of financing where borrowers borrow funds directly from the financial market without using a third party service, such as a financial intermediary. This is different from indirect financing where a financial intermediary takes the money from the lender with an interest rate and lends it to a borrower with a higher interest rate. Direct financing is usually done by borrowers that sell securities and/or shares to raise money and circumvent the high interest rate of financial intermediary(banks). We may regard transactions as direct finance, even when a financial intermediary is included, in case

neg: Basil Moore where he joined the University of Stellenbosch with which he had long maintained an association and, "where he was Professor Extraordinary of Economics." Moore emphasizes the mechanics of credit creation, particularly lines of credit extended by banks to large corporations on the money supply. He argues that the ability of commercial banks to extend credit is limited only by demand for money by creditworthy borrowers, as central banks are compelled to act to ensure there is always a sufficient supply of money for demand to be met (at their target interest rate). Moore contrasted his own "horizontalist" view of the

neg: Carry (investment) earn the spread between borrowing a low carry asset and lending a high carry one; such as gold during financial crisis, due to its safe haven quality. Carry trades are not usually arbitrages: pure arbitrages make money no matter what; carry trades make money "only if nothing changes" against the carry's favor. For instance, the traditional revenue stream from commercial banks is to borrow cheap (at the low overnight rate, i.e., the rate at which they pay depositors) and lend expensive (at the long-term rate, which is usually higher than the short-term rate). This works with an upward-sloping yield curve,

neg: History of money at one time there were more than 5,000 different types of banknotes issued by various commercial banks in America. Only the notes issued by the largest, most creditworthy banks were widely accepted. The scrip of smaller, lesser-known institutions circulated locally. Farther from home it was only accepted at a discounted rate, if at all. The proliferation of types of money went hand in hand with a multiplication in the number of financial institutions. These banknotes were a form of representative money which could be converted into gold or silver by application at the bank. Since banks issued notes far in

neg: SAIBOR SAIBOR The Saudi Arabian Interbank Offered Rate (SAIBOR) is a daily reference rate, published by SAMA (Saudi Arabian Monetary Authority), based on the averaged interest rates at which Saudi banks offer to lend unsecured funds to other banks in the Saudi Riyal wholesale money market (or interbank market). On 20 November 2016 Thomson Reuters was approved as the SAIBOR administrator and calculation agent by SAMA. SAIBOR is the key interbank rate in Saudi Arabia, and the benchmark for commercial and consumer lending rates. It is also known as SIBOR, Saudi Interbank Offered Rate, but can be confused with SIBOR, Singapore

neg: Central bank will have other tools and rates that are used, but only one that is rigorously targeted and enforced. "The rate at which the central bank lends money can indeed be chosen at will by the central bank; this is the rate that makes the financial headlines." – Henry C.K. Liu. Liu explains further that "the U.S. central-bank lending rate is known as the Fed funds rate. The Fed sets a target for the Fed funds rate, which its Open Market Committee tries to match by lending or borrowing in the money market ... a fiat money system set by command

neg: Credit-linked note its books by creating a credit-linked note for itself, betting on its own credit worthiness. In Hong Kong and Singapore, credit-linked notes have been marketed as "minibonds" and sold to individual investors. After Lehman Brothers, the major issuer of minibond in Hong Kong and Singapore, filed for bankruptcy in September 2008, many retail investors of minibonds claim that banks and brokers mis-sold minibonds as low-risk products. Many banks accepted minibonds as collateral for loans and credit facilities. A bank lends money to a company, XYZ, and at the time of loan issues credit-linked notes bought by investors. The interest rate

neg: Reserve requirement Even in the United States, which retains formal (though now mostly irrelevant) reserve requirements, the notion of controlling the money supply by targeting the quantity of base money fell out of favor many years ago, and now the pragmatic explanation of monetary policy refers to targeting the "interest rate" to control the broad money supply. In the UK the term clearing banks is sometimes used, meaning banks that have direct access to the clearing system. However, for the purposes of clarity, the term "commercial banks" will be used for the remainder of this section. The Bank of England, which is

neg: Credit control in India This Rate is increased during the times of inflation when the money supply in the economy has to be controlled. At any time there are various rates of interest ruling at the market, like the deposit rate, lending rate of commercial banks, market discount rate and so on. But, since the central bank is the leader of the money market and the lender of the last resort, al other rates are closely related to the bank rate. The changes in the bank rate are, therefore, followed by changes in all other rates as the money market. The graph on the

neg: Reserve Bank of India and all the scheduled commercial bank can participate in this scheme. Banks can borrow up to 2.5% percent of their respective Net Demand and Time Liabilities. RBI receive application under this facility for a minimum amount of Rs. One crore and in multiples of Rs. One crore thereafter. The important difference with repo rate is that bank can pledge government securities from SLR quota (up to one percent). So even if SLR goes below 20.5%(RBI/2014-15/445 DBR.Ret.BC.70/12.02.001/2014-15, dt. 16.10.2016) by pledging SLR quota securities under MSF, bank will not have to pay any penalty. The MSF rate is set to 100

neg: Call money Call money Call money is minimum 5% short-term finance repayable on demand, with a maturity period of one to fourteen days or overnight to fortnight. It is used for inter-bank transactions. The money that is lent for one day in this market is known as "call money" and, if it exceeds one day, is referred to as "notice money." Commercial banks have to maintain a minimum cash balance known as the cash reserve ratio. Call money is a method by which banks lend to each other to be able to maintain the cash reserve ratio. The interest rate paid on

neg: Credit control in India be part of meetings between RBI and Commercial Banks. RBI persuades the commercial bank to follow their policies. RBI puts a pressure on the commercial banks to put a ceiling on credit flow during inflation and be liberal in lending during deflation. By quantitative credit control we mean the control of the total "quantity" of credit. For Example- let us consider that the Central Bank, on the basis of its calculations, considers that Rs. 50,000 is the maximum safe limit for the expansion of credit. But the actual credit at that given point of time is Rs. 55,000(say). Thus it

neg: Interest rate ceiling financial institution must pay to borrow the funds that it then lends out. For a commercial bank or deposit taking microfinance institutions this is usually the interest that it gives on deposits. For other institutions it could be the cost of wholesale funds, or a subsidised rate for credit provided by government or donors. Other MFIs might have very cheap funds from charitable contributions. The overheads reflect three broad categories of cost. The overheads, and in particular the processing costs can drive the price differential between larger loans from banks and smaller loans from MFIs. Overheads can vary significantly between

neg: Money market The Money Market enables the commercial banks to use their excess reserves in profitable investment. The main objective of the commercial banks is to earn income from its reserves as well as maintain liquidity to meet the uncertain cash demand of the depositors. In the money market, the excess reserves of the commercial banks are invested in near-money assets (e.g., short-term bills of exchange), which are easily converted into cash. Thus, commercial banks earn profits without sacrificing liquidity. Developed money markets help the commercial banks to become self-sufficient. In the situation of emergency, when the commercial banks have scarcity of

neg: Call money call money is known as the call rate. It is a highly volatile rate that varies from day to day and sometimes even from hour to hour. There is an inverse relationship between call rates and other short-term money market instruments such as certificates of deposit and commercial paper. A rise in call money rates makes other sources of finance, such as commercial paper and certificates of deposit, cheaper in comparison for banks to raise funds from these sources. In the international market, the term usually refers to the short term financing by banking institutions to brokers for maintaining the

neg: Fractional-reserve banking of broad money that could be created by commercial banks for a given fixed amount of base money and reserve ratio. This theoretical maximum is never reached, because some eligible reserves are held as cash outside of banks. Rather than holding the quantity of base money fixed, central banks have recently pursued an interest rate target to control bank issuance of credit indirectly so the ceiling implied by the money multiplier does not impose a limit on money creation in practice. The money multiplier, "m", is the inverse of the reserve requirement, "R": For example, with the reserve ratio of

neg: Euribor lending in the euro-zone, i.e. like the federal funds rate in the US. The banks contributing to Eonia were the same as the Panel Banks contributing to Euribor. However "On 1st June 2013 the Eonia® and Euribor® respective panels of contributing banks have been differentiated."(EMMI website) Euribor The Euro Interbank Offered Rate (Euribor) is a daily reference rate, published by the European Money Markets Institute, based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market). Prior to 2015, the rate was published by

neg: Banking in Armenia Banking in Armenia In order to support the sector and increase availability of loans, the Central Bank of Armenia (CBA) started the process of monetary policy easing by systematically lowering the refinancing rate, which decreased by 4.5p.p. down to 6% between 2015-2017. This has pushed banks to revise rates on loans and deposits downwards, evidenced by dropping credit and deposit rates from 14,7% to 10,7% and from 9,7% to 5,3% in 2016-2017 respectively. The Central Bank of Armenia is charged with regulating the money supply, circulating currency, and regulating the commercial banks of the country. Commercial banks in Armenia include

neg: Fractional-reserve banking underlying base money originally created by the central bank. In most countries, the central bank (or other monetary authority) regulates bank credit creation, imposing reserve requirements and capital adequacy ratios. This can limit the process of money creation that occurs in the commercial banking system, and helps to ensure that banks are solvent and have enough funds to meet demand for withdrawals. However, rather than directly controlling the money supply, central banks usually pursue an interest rate target to adjust the rate of inflation and bank issuance of credit. Fractional-reserve banking predates the existence of governmental monetary authorities and originated

neg: Asset–liability mismatch by short-term liabilities, such as deposits. If short-term interest rates rise, the short-term liabilities re-price at maturity, while the yield on the longer-term, fixed-rate assets remains unchanged. Income from the longer-term assets remains unchanged, while the cost of the newly re-priced liabilities funding these assets increases. This is sometimes called a maturity mismatch, which can be measured by the duration gap. An interest rate mismatch occurs when a bank borrows at one interest rate but lends at another. For example, a bank might borrow money by issuing floating interest rate bonds, but lend money with fixed-rate mortgages. If interest rates

neg: Fixed deposit a Central Bank adopts a tight monetary policy, that is, it hikes the interest rates at which it lends to banks ("repo rates"?). Under such conditions, banks also hike both their lending (i.e. loan) as well as deposit (FD) rates. Under such conditions of high FD rates, FDs become an attractive investment avenue as they offer good returns and are almost completely secure with no risk. These can be checked with the excess rates in the country. Fixed deposit A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest

neg: Money market in India and stock exchanges. Commercial banks, both Indian and foreign, co-operative banks, Discount and Finance House of India Ltd.(DFHI), Securities trading corporation of India (STCI) participate as both lenders and borrowers and Life Insurance Corporation of India (LIC), Unit Trust of India(UTI), National Bank for Agriculture and Rural Development (NABARD)can participate only as lenders. The interest rate paid on call money loans, known as the call rate, is highly volatile. It is the most sensitive section of the money market and the changes in the demand for and supply of call loans are promptly reflected in call rates. There are now

neg: Forward-forward agreement Forward-forward agreement In business and contract law, a forward-forward agreement (FFA) is a form of forward rate agreement in which party "A" agrees to lend party "B" the "m" amount of money, at future time "t". In return, "B" will pay to "A" a larger monetary amount "m" at time "t > t". The name "forward-forward agreement" derives from the fact that both issuing and repayment of the loan take place in the future. A regular forward rate agreement lends the money at once. A quoted forward rate is associated with every forward-forward agreement. This can be thought of as

neg: Net interest spread be different. For example, a bank has average loans to customers of $100, and earns gross interest income of $6. The interest yield is 6/100 = 6%. A bank takes deposits from customers and pays 1% to those customers. The bank lends its customers money at 6%. The bank's net interest spread is 5%. Successful Bank Asset/Liability Management: A Guide to the Future Beyond Gap, John W. Bitner, Robert A. Goddard, 1992, p. 185. There are several popular commercial net interest spread software packages to help banks manage and grow their net interest spread effectively. Among these are: Net interest

neg: Money market in India Reforms made in the Indian Money Market are:- Deregulation of the Interest Rate : In recent period the government has adopted an interest rate policy of liberal nature. It lifted the ceiling rates of the call money market, short-term deposits, bills rediscounting, etc. Commercial banks are advised to see the interest rate change that takes place within the limit. There was a further deregulation of interest rates during the economic reforms. Currently interest rates are determined by the working of market forces except for a few regulations. Money Market Mutual Fund (MMMFs) : In order to provide additional short-term investment

neg: Official cash rate Official cash rate The official cash rate (OCR) is the term used in Australia and New Zealand for the bank rate and is the rate of interest which the homogeneous central bank charges on overnight loans to commercial banks. This allows the Reserve Bank of Australia and the Reserve Bank of New Zealand to adjust the interest rates that apply in each country's economy. The OCR cannot be changed by transactions between financial institutions as this does not change the supply of money, only its location. Only transfers between the central bank and an institution can affect the OCR. As

neg: SME Rating Agency of India way for SMERA to rate/grade various instruments such as: IPO, NCDs, Commercial Papers, Bonds, Security Receipts, Fixed Deposits etc. In addition to this, RBI has told that Banks may use ratings of bank facilities (Bank Loan Ratings) from SMERA, to assign risks to loans for the purpose of computing capital adequacy requirements. The agency was founded in 2005 by Small Industries Development Bank of India (SIDBI), Dun & Bradstreet Information Services India Private Limited (D&B) and several leading Govt., Public, Private and MNC banks in the country. 1) SMERA has pioneered SME ratings in the country and has till date

neg: Reserve Bank of India last resort by providing emergency advances to the banks. It supervises the functioning of the commercial banks and takes action against it if the need arises. The RBI also advises the banks on various matters for example Corporate Social Responsibility. RBI has the responsibility of regulating the nation's financial system. As a regulator and supervisor of the Indian banking system it ensures financial stability & public confidence in the banking system. RBI uses methods like On-site inspections, off-site surveillance, scrutiny & periodic meetings to supervise new bank licenses, setting capital requirements and regulating interest rates in specific areas. RBI is

neg: Monetary circuit theory just an entry in a bank account book (not specie – bills and coins), and a purchase subtracts money from the buyer's account with the bank, and adds it to the seller's account with the bank. As with other monetary theories, circuitism distinguishes between hard money – money that is exchangeable at a given rate for some commodity, such as gold – and credit money. The theory considers credit money created by commercial banks as primary (at least in modern economies), rather than derived from central bank money – credit money drives the monetary system. While it does not claim

neg: Reserve Bank of New Zealand interest usually at the official cash rate. Banks that offer loans at interest higher than the official cash rate will be undercut by Banks that offer cheaper loans, and banks that loan out lower than the official cash rate will make less compared to other banks which can simply deposit their money in the Reserve Bank with a higher rate of return. The Reserve Bank borrows and offers loans with no limit on volumes in order to ensure that the interest rate in the market remains at the Official Cash rate level. Through controlling this, the Reserve Bank can then

neg: Overnight policy rate Overnight policy rate The overnight policy rate is an overnight interest rate set by Bank Negara Malaysia (BNM) used for monetary policy direction. It is the target rate for the day-to-day liquidity operations of the BNM. The overnight policy rate (OPR) is the interest rate at which a depository institution lends immediately available funds (balances within the central bank) to another depository institution overnight. The amount of money a bank has fluctuates daily based on its lending activities and its customers’ withdrawal and deposit activity, therefore the bank may experience a shortage or surplus of cash at the end of

neg: Macroeconomics several mechanisms. Typically, central banks take action by issuing money to buy bonds (or other assets), which boosts the supply of money and lowers interest rates, or, in the case of contractionary monetary policy, banks sell bonds and take money out of circulation. Usually policy is not implemented by directly targeting the supply of money. Central banks continuously shift the money supply to maintain a targeted fixed interest rate. Some of them allow the interest rate to fluctuate and focus on targeting inflation rates instead. Central banks generally try to achieve high output without letting loose monetary policy that create

neg: Johannesburg Interbank Average Rate Johannesburg Interbank Average Rate The Johannesburg Interbank Average Rate (JIBAR) is the money market rate, used in South Africa. It is calculated as the average interest rate at which banks buy and sell money. This rate is calculated daily by the South African Futures Exchange as the average prime lending rate quoted independently by a number of different banks. The rate is available in one-month, three-month, six-month and twelve-month discount terms. In particular, the three-month JIBAR rate is used as a benchmark of short-term interest rate movements. The rate is calculated daily after all of the rates are received. It

neg: Johannesburg Interbank Average Rate is calculated as a yield and then converted into a discounted rate. The JIBAR rate is available daily from Thomson Reuters. Johannesburg Interbank Average Rate The Johannesburg Interbank Average Rate (JIBAR) is the money market rate, used in South Africa. It is calculated as the average interest rate at which banks buy and sell money. This rate is calculated daily by the South African Futures Exchange as the average prime lending rate quoted independently by a number of different banks. The rate is available in one-month, three-month, six-month and twelve-month discount terms. In particular, the three-month JIBAR rate is used

neg: Euribor Euribor The Euro Interbank Offered Rate (Euribor) is a daily reference rate, published by the European Money Markets Institute, based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market). Prior to 2015, the rate was published by the European Banking Federation. Euribors are used as a reference rate for euro-denominated forward rate agreements, short-term interest rate futures contracts and interest rate swaps, in very much the same way as LIBORs are commonly used for Sterling and US dollar-denominated instruments. They thus provide the

neg: Small finance bank of paid-up share capital in a private sector bank will require prior approval of RBI. This will also apply to the small finance banks. The newly set up small finance banks should ensure that they put in place a robust risk management framework. The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of CRR and SLR. No forbearance would be provided for complying with the statutory provisions. In view of the objective for which small finance bank will be set up, it will be

neg: Pushing on a string be precisely backed by reserves and the money multiplier is 1. The distinction between fractional-reserve and full-reserve is not significant in this context – the important point is that in both systems, loans must be backed by reserves. Crucially, central banks can "limit" money creation by either limiting the "amount" of base money extended, thus denying reserves and preventing commercial banks from extending further loans, or by raising the "price" of base money extended by increasing interest rates and thus making loans less profitable for the bank (raising the hurdle rate), and while relaxing these constraints can "encourage" money creation,

neg: Monetary Policy Committee Treasury Select Committee, as well as speaking to wider audiences at events during the year. The Committee is responsible for formulating the United Kingdom's monetary policy, most commonly via the setting of the rate at it which it lends to banks (officially the Bank of England Base Rate or BOEBR for short). As laid out in law, decisions are made with a primary aim of price stability, defined by the government's inflation target (2% per year on the Consumer Price Index as of 2016). The target takes the form of a "point", rather than the "band" used by the Treasury

neg: Duvvuri Subbarao regularly going against majority opinion of fellow experts in the apex level committee. During Subbarao's last days at the helm of RBI, the banking industry in India was rocked by the infamous Cobra Post expose of money laundering by leading Indian banks through violation of RBI's KYC guidelines, which pointed to the slackness and loopholes in the supervisory role of RBI. Dr Subbarao was also drawn into controversy when a whistleblowing complaint written to him in October 2012 by the noted activist Dr. Devidas Tuljapurkar against fraudulent activities of Bank of Maharashtra, was routinely and unthinkingly forwarded by the RBI

neg: Overnight rate Overnight rate The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market. In some countries (United States Of America, for example), the overnight rate may be the rate targeted by the central bank to influence monetary policy. In most countries, the central bank is also a participant on the overnight lending market, and will lend or borrow money to some group of banks. There may be a published overnight rate that represents an average of the rates at which banks lend to each other; certain types of

neg: G. William Miller and charged the meeting's attendees with preventing future leaks. It is rare for the influential chair's opinion to not carry the vote at Board of Governors and FOMC meetings, but Miller was outvoted by the Board of Governors at a meeting in 1979 where he opposed an increase in the discount rate, the rate at which the Federal Reserve lends to banks. Additionally, he was the lone dissenting vote for his first FOMC regulatory vote. Miller's comfort with non-unanimous FOMC votes was inconsistent across meetings. He told the FOMC that he preferred sincere votes (including dissents) over unwilling consensus, yet

neg: Money market to (i.e., priced by reference to) the London Interbank Offered Rate (LIBOR) for the appropriate term and currency. Finance companies typically fund themselves by issuing large amounts of asset-backed commercial paper (ABCP), which is secured by the pledge of eligible assets into an ABCP conduit. Examples of eligible assets include auto loans, credit card receivables, residential/commercial mortgage loans, mortgage-backed securities and similar financial assets. Some large corporations with strong credit rating issue commercial paper on their own credit. Other large corporations arrange for banks to issue commercial paper on their behalf. In the United States, federal, state and local governments

neg: Central bank accept that currency to pay for taxes. A central bank may use another country's currency either directly in a currency union, or indirectly on a currency board. In the latter case, exemplified by the Bulgarian National Bank, Hong Kong and Latvia, the local currency is backed at a fixed rate by the central bank's holdings of a foreign currency. Similar to commercial banks, central banks hold assets (government bonds, foreign exchange, gold, and other financial assets) and incur liabilities (currency outstanding). Central banks create money by issuing interest-free currency notes and selling them to the public (government) in exchange for

neg: Fixed deposit rates of interest than saving accounts. The longest permissible term for FDs is 10 years. Generally, the longer the term of deposit, higher is the rate of interest but a bank may offer lower rate of interest for a longer period if it expects interest rates, at which the Central Bank of a nation lends to banks ("repo rates"), will dip in the future. Usually in India the interest on FDs is paid every three months from the date of the deposit. (e.g. if FD a/c was opened on 15th Feb., first interest installment would be paid on 15 May).

neg: Money multiplier commercial bank money is "at most" reserves times formula_4 the latter being the multiplier. If banks lend out close to the maximum allowed by their reserves, then the inequality becomes an approximate equality, and commercial bank money is central bank money times the multiplier. If banks instead lend less than the maximum, accumulating excess reserves, then commercial bank money will be "less" than central bank money times the theoretical multiplier. The money multiplier is defined in various ways. Most simply, it can be defined either as the statistic of "commercial bank money"/"central bank money", based on the actual observed quantities

neg: Subprime crisis background information U.S. government to pass the Emergency Economic Stabilization Act of 2008. The “TED spread” is a measure of credit risk for inter-bank lending. It is the difference between: 1) the risk-free three-month U.S. treasury bill (t-bill) rate; and 2) the three-month London Interbank Borrowing Rate (LIBOR), which represents the rate at which banks typically lend to each other. A higher spread indicates banks perceive each other as riskier counterparties. The t-bill is considered "risk-free" because the full faith and credit of the U.S. government is behind it; theoretically, the government could just print money so investors get their money back

neg: SIBOR SIBOR SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend "unsecured" funds to other banks in the Singapore wholesale money market (or interbank market). It is similar to the widely used LIBOR (London Interbank Offered Rate), and Euribor (Euro Interbank Offered Rate). Using SIBOR is more common in the Asian region and set by the Association of Banks in Singapore (ABS). SIBOR comes in 1-, 3-, 6- , or 12-month tenure. At the end of the tenure, the borrowing bank returns the borrowed fund to

neg: Triodos Bank the major towns. Triodos Bank maintains the following policy concerning the financial activities and investments: Triodos is unusual in that it only lends to businesses and charities judged to be of social or ecological benefit. This "positive screening" extends its policies beyond those of ethical banks which solely avoid investing in companies judged to be doing harm ("negative screening"). The bank uses money deposited by close to 100,000 savers and lends it to hundreds of organisations, such as fair trade initiatives, organic farms, cultural and arts initiatives, renewable energy projects, and social enterprises. "[Triodos] does not lend to organisations, businesses

neg: Social enterprise lending depositors and investors who want to encourage corporate social responsibility and a sustainable society. It is a pioneer in ethical banking. Triodos Bank finances companies which it expects will add cultural value and benefit both people and the environment. The bank uses money deposited by close to 100,000 savers and lends it to hundreds of organisations, such as fair trade initiatives, organic farms and social enterprises. Charity Bank provides loan finance and advice to enable charities, community associations, voluntary organisations, community businesses and social enterprises across the UK to grow. It often lends where banks or building societies either will

neg: TIBOR TIBOR TIBOR stands for the Tokyo Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend "unsecured" funds to other banks in the Japan wholesale money market (or interbank market). TIBOR is published daily by the Japanese Bankers Association (JBA). TIBOR is calculated based on the quotes for different maturities provided by reference banks at about 11.00 a.m. each business day. There are two forms of TIBOR rates: Japanese Yen TIBOR rate (introduced in November 1995, it reflects rates in unsecured call market) and Euroyen TIBOR rate (introduced in March

neg: Interest rate saving and reduce inflation. The Federal Reserve (often referred to as 'The Fed') implements monetary policy largely by targeting the federal funds rate. This is the rate that banks charge each other for overnight loans of federal funds, which are the reserves held by banks at the Fed. Open market operations are one tool within monetary policy implemented by the Federal Reserve to steer short-term interest rates using the power to buy and sell treasury securities. Loans, bonds, and shares have some of the characteristics of money and are included in the broad money supply. By setting i*, the government

neg: Federal funds rate time to wait for deposits or interest (on loan payments) to come in. In such cases the bank will quickly raise this amount from other banks at an interest rate equal to or higher than the Federal funds rate. Raising the federal funds rate will dissuade banks from taking out such inter-bank loans, which in turn will make cash that much harder to procure. Conversely, dropping the interest rates will encourage banks to borrow money and therefore invest more freely. This interest rate is used as a regulatory tool to control how freely the U.S. economy operates. By setting a

neg: Open market operation banks for expressions of interest. In a fixed rate tender the ECB also specifies the interest rate at which it is willing to lend money; alternatively, in a variable rate tender the interest rate is not specified and banks bid against each other (subject to a minimum bid rate specified by the ECB) to access the available liquidity. MRO auctions are held on Mondays, with settlement (i.e., disbursal of the funds) occurring the following Wednesday. For example, at its auction on 6 October 2008, the ECB made available 250 million in EUR on 8 October at a minimum rate of

neg: IS–LM model therefore the position and slope of the function: The money supply function for this situation is plotted on the same graph as the liquidity preference function. The money supply is determined by the central bank decisions and willingness of commercial banks to loan money. Though the money supply is related indirectly to interest rates in the very short run, the money supply in effect is perfectly inelastic with respect to nominal interest rates (assuming the central bank chooses to control the money supply rather than focusing directly on the interest rate). Thus the money supply function is represented as a

neg: Reserve Bank of India Act, 1934 conduct business. The RBI can accept deposits from the central and state governments without interest. It can purchase and discount bills of exchange from commercial banks. It can purchase foreign exchange from banks and sell it to them. It can provide loans to banks and state financial corporations. It can provide advances to the central government and state governments. It can buy or sell government securities. It can deal in derivative, repo and reverse repo. The Section 18 deals with emergency loans to banks. The Section 21 states the RBI must conduct the banking affairs for the central government and

neg: Money multiplier does not; for example, increases in central bank money may result in increases in commercial bank money – and will, if these ratios (and thus multiplier) stay constant – or may result in increases in excess reserves but little or no change in commercial bank money, in which case the reserve–deposit ratio will grow and the multiplier will fall. There are two suggested mechanisms for how money creation occurs in a fractional-reserve banking system: either reserves are first injected by the central bank, and then lent on by the commercial banks, or loans are first extended by commercial banks, and

neg: Narasimham Committee on Banking Sector Reforms still awaiting Government follow-through and implementation. First, the committee recommended that the RBI withdraw from the 91-day treasury bills market and that interbank call money and term money markets be restricted to banks and primary dealers. Second, the Committee proposed a segregation of the roles of RBI as a "regulator" of banks and "owner" of bank. It observed that ""The Reserve Bank as a regulator of the monetary system should not be the owner of a bank in view of a possible conflict of interest"". As such, it highlighted that RBI's role of effective supervision was not adequate and wanted

neg: Negative interest on excess reserves It turns out this was not quite right. Central banks in Europe and in Japan have demonstrated rates can go negative, and several have pushed them in that direction for the same reason they lowered them to zero in the first place—to provide stimulus and, where inflation is below target, to raise the inflation rate. The notion is that negative rates will provide even more incentive for commercial banks to make loans. What might have looked like a project not worth funding even in a low-interest-rate environment might now look attractive if the alternative is being charged to store money

neg: EIBOR of January 2017 the following banks contribute to EIBOR: EIBOR The Emirates Interbank Offered Rate (EIBOR), also abbreviated as EBOR, is a daily reference rate, published by the UAE Central Bank, based on the averaged interest rates at which UAE banks offer to lend unsecured funds to other banks in the United Arab Emirates dirham wholesale money market (or interbank market). As of 29 May 2015 fixing is conducted each business day excluding Saturdays at 11AM UAE time. The fixing rate is the average of the contributions excluding the two highest and two lowest contributions for each tenor. As of

neg: Banking in Azerbaijan million in 1999, and expected to increase the figure to $3 million in 2001 (the latest year for which data was available), effectively consolidating the sector. The International Monetary Fund reports that in 2001, currency and demand deposits — an aggregate commonly known as M1—were equal to $363.6 million. In that same year, M2 — an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $738.5 million. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 10%. The Baku Stock Exchange, known as

neg: TIBOR 1998, it reflects rates in offshore market). TIBOR TIBOR stands for the Tokyo Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend "unsecured" funds to other banks in the Japan wholesale money market (or interbank market). TIBOR is published daily by the Japanese Bankers Association (JBA). TIBOR is calculated based on the quotes for different maturities provided by reference banks at about 11.00 a.m. each business day. There are two forms of TIBOR rates: Japanese Yen TIBOR rate (introduced in November 1995, it reflects rates in unsecured call market)

neg: Knut Wicksell the existence of credit money, Wicksell argued, two interest rates prevail: the "natural" rate and the "money" rate. The natural rate is the return on capital – or the real profit rate. It can be roughly considered to be equivalent to the marginal product of new capital. The money rate, in turn, is the loan rate, an entirely financial construction. Credit, then, is perceived quite appropriately as "money". Banks provide credit, after all, by creating deposits upon which borrowers can draw. Since deposits constitute part of real money balances, therefore the bank can, in essence, "create" money. Wicksell's main thesis,

neg: Love of money the church, ie paying money to the church to gain a reduction of penalty of sins in purgatory (a belief unique to the Catholic church) as being more commercial greed of the church than it was doing actual good for the Christian person. Later in some sermons he shone the spotlight on commercial money lenders which happened to be Jewish and one can argue have anti-semitic undertones. However, more to the point is thesis 43 of the Ninety Five thesis "A Christian who gives to the poor or lends to those in need is doing better in God’s eyes than

neg: Discount window also not the same thing as the federal funds rate or its equivalents in other currencies, which determine the rate at which banks lend money to "each other". In recent years, the discount rate has been approximately a percentage point above the federal funds rate (see Lombard credit). Because of this, it is a relatively unimportant factor in the control of the money supply and is only taken advantage of at large volume during emergencies. In the United States, there are actually several different rates charged to institutions borrowing at the Discount Window. In 2006, these were: the primary credit

neg: Fractional-reserve banking banks to practice fractional-reserve banking with inter-bank business transactions with a reduced risk of bankruptcy. There are two types of money in a fractional-reserve banking system operating with a central bank: When a deposit of central bank money is made at a commercial bank, the central bank money is removed from circulation and added to the commercial banks' reserves (it is no longer counted as part of M1 money supply). Simultaneously, an equal amount of new commercial bank money is created in the form of bank deposits. At least one textbook states that when a loan is made by the

neg: Interbank lending market manage any potential bank runs by clients. If a bank cannot meet these liquidity requirements, it will need to borrow money in the interbank market to cover the shortfall. Some banks, on the other hand, have excess liquid assets above and beyond the liquidity requirements. These banks will lend money in the interbank market, receiving interest on the assets. The interbank rate is the rate of interest charged on short-term loans between banks. Banks borrow and lend money in the interbank lending market in order to manage liquidity and satisfy regulations such as reserve requirements. The interest rate charged depends

neg: Pushing on a string by commercial banks through fractional reserve banking; this expands the amount of broad money (i.e. cash plus demand deposits) in the economy so that it is a multiple (known as the money multiplier) of the amount originally created by the central bank. Money is in essence "pushed" from central banks to commercial banks, and then to borrowers. This is the crux of the "pushing on a string" metaphor – that money cannot be pushed from the central bank to borrowers if they do not wish to borrow. Alternatively, the process can be seen as borrowers demanding credit from commercial banks,

neg: Helicopter money policy option than universal basic income. Under a strict definition, where helicopter drops are simply transfers from the central bank to the private sector financed with base money a number of economists have argued that they are already occurring. In 2016, the European Central Bank (ECB) launched a TLTRO programme lending money to banks at negative interest rates, which amounts to a transfer to banks. Also the use of differential interest rates on tiered reserves to support commercial banks' profitability in the face of negative interest rates, opens up another source of helicopter drop - albeit intermediated by banks. In

neg: Cumulative process levels, but the original increase is endogenous, created by the conditions of the financial and real sectors. With the existence of credit money, Wicksell claimed, two interest rates prevail: the "natural" rate and the "money" rate. The natural rate is the return on capital - or the real profit rate. It can be considered to be equivalent to the marginal product of new capital. The money rate, in turn, is the loan rate, an entirely financial construction. Credit, then, is perceived quite appropriately as "money". Banks provide credit, after all, by creating deposits upon which borrowers can draw. Since deposits

neg: Profit and loss sharing using its export refinance scheme. Instead of lending money to banks at a rate of 6.5% for them to lend to exporting firms at 8% (as it does for conventional banks), it uses a musharaka pool where instead of being charged 8%, firms seeking export credit are "charged the financing banks average profit rate based on the rate earned on financing offered to ten `blue-chip` bank corporate clients". However, critic Feisal Khan complains, despite "rigamarole" of detailed instructions for setting up the pool and profit rate, in the end the rate is capped by the State Bank at "the rate

neg: Real interest rate have different expectations of future inflation. Since the inflation rate over the course of a loan is not known initially, volatility in inflation represents a risk to both the lender and the borrower. In the case of contracts stated in terms of the nominal interest rate, the real interest rate is known only at the end of the period of the loan, based on the realized inflation rate; this is called the ex-post real interest rate. Since the introduction of inflation-indexed bonds, ex-ante real interest rates have become observable. In economics and finance, an individual who lends money for repayment

neg: Money market in India revenue, the RBI encouraged and established the Money Market Mutual Funds (MMMFs) in April 1992. MMMFs are allowed to sell units to corporate and individuals. The upper limit of 50 crore investments has also been lifted. Financial institutions such as the IDBI and the UTI have set up such funds. Establishment of the DFI : The Discount and Finance House of India (DFHI) was set up in April 1988 to impart liquidity in the money market. It was set up jointly by the RBI, Public sector Banks and Financial Institutions. DFHI has played an important role in stabilizing the Indian