Understanding Financial Crisis

Dear Friends,
Hope you are enjoying the articles posted, every one of us know that there is financial crisis around us but even some of us know what happend or few people are not able to explain to other or there kids, so i thought of sharing this information using a video. Enjoy this video to learn how this financail crisis started and explain your kids about that's happending around us. I feel we need to teach our kids from childwhood on wards about the financial education, in todays information age the financial cyclic process become very frequent, if the next generation don't undestand what's happending and how to avoide or how to face them they will be in truble, so its very impotant to have financial education also along with other activites as a port of there life.

feel free to post your comments in the comments section, this video creation is not my idea but i feel this is a good information to share that is the reason i am sharing with all of you.

Regards,

Venkat

About Banking Rates

Dear Readers,

Hope you are enjoying the article in this personal finance page, We are glad to come up with new article which will explain you about some important term related to banks & central bank policy. Lot of times in news papas we will see that central banks changing some key rations and rates in the process of Monetary policy. Some examples are those are CRR (Cash Reserve Ratio ), SLR, Repo Rate & Reverse Rapo Rate.

CRR (Cash Reserve Ratio) Rate in India : Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

Policy Rates : As a part of Monetary policy central bank will define these rates, in general there are 3 types of rates in the category (in India), they are Bank Rate, Repo Rate & Reverse Repo Rate. In detail

Bank rate : Bank Rate is the rate at which central bank of the country (in India it is RBI) allows finance to commercial banks. Bank Rate is a tool, which central bank uses for short-term purposes. Any upward revision in Bank Rate by central bank is an indication that banks should also increase deposit rates as well as Prime Lending Rate. This any revision in the Bank rate indicates could mean more or less interest on your deposits and also an increase or decrease in your EMI.

Bank Rate(For Non Bankers): 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, and vice-versa. Thus, it can said that in case bank rate is hiked, in all likelihood banks will hikes their own lending rates to ensure and they continue to make a profit.

Repo (Repurchase) rate : 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. Therefore, we can say that in case, RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.

Reverse Repo rate : 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. An increase in the reverse repo rate means that the RBI will borrow money from the banks at a higher rate of interest. As a result, banks would prefer to keep their money with the RBI .

SLR : Every bank is required to maintain at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). An increase in SLR also restrict the bank’s leverage position to pump more money into the economy.

SLR (For Non Bankers): SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. Thus, we can say that it is ratio of cash and some other approved to liabilities (deposits) It regulates the credit growth in India.