Reserve Bank of India (RBI) governor Raghuram Rajan cut the repo rate by 25 basis points to 7.25% from 7.5% in the central bank's monetary policy review. The central bank kept the Cash Reserve Ratio (CRR) unchanged at 4%.
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Definitions of Bank Rates:
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Repo rate is the rate at which the central bank of a country (Reserve Bank of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.
Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.
Reverse Repo rate is the rate at which the RBI borrows money from commercial banks.
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