Money Supply (M1) : It is also called as Narrow Money, which includes coins and currency in circulation. M1 also comprise of the other money equivalents (demand deposits with Banks and other deposits with RBI) that could be easily converted into Cash.
Money Supply (M3) : Generally referred as Broad Money, which comprises of coins, currency notes, cash equivalents (demand deposits), Short Term deposits with Banks, Time Deposits with Banks. The exact definition of these measures could vary from country to country.
Repo Rate : It is the rate at which Central Bank of the country (RBI) lend funds to the Commercial Banks for meeting short term requirements against collaterals. Monetary authorities use this rate for controlling inflation.
Reverse Repo Rate : The rate at which Central Bank of the country borrows funds from the Commercial Banks. It is a monetary policy instrument to control the money supply in the economy.
Bank Rate : Bank rate is determined by Reserve Bank of India (RBI) in India. It is the rate at which RBI extend loans to the Commercial Banks with no collateral.
Open Market Operations (OMO) : The Monetary Authority uses OMO for sale or purchase of the Government Securities to control money supply in the economy. The RBI sells Government Securities in the market to suck excess liquidity from the market and buys Government Securities to infuse liquidity into the markets.
Cash Reserve Ratio (CRR) : A certain percentage of net demand and term liabilities (NDTL) of the Commercial Banks has to be held in the form of deposits with Reserve Bank of India. RBI can suck the liquidity from the markets by increasing CRR or infuse liquidity by reducing CRR. There is no interest payable to Banks for maintaining CRR with RBI.
Statutory Liquidity Ratio (SLR) : A certain percentage of net demand and term liabilities (NDTL) of the Commercial Banks has to be invested predominantly in Central Government and State Government Securities. These securities carry a coupon rate i.e. interest rate that is payable on the face value of securities. This Ratio is also used to manage liquidity in the markets.
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