Indian Economy – Important Terminology

Cash Reserve Ratio (CRR) :- It is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks comes down. The RBI uses the CRR to drain out excessive money from the system.

Statutory Liquidity Ratio (SLR) Rate :- SLR (Statutory Liquidity Ratio) is the amount a Commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers.

Repo Rate :- The rate at which the RBI lends money to commercial banks is called repo rate. It is an instrument of monetary policy.

Reverse Repo Rate :- It is the rate at which the RBI borrows money from commercial banks.

Bank Rate :- Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries.

Prime Lending Rate (PLR) :- The Prime Lending Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers).

Foreign Institutional Investors (FII) :- FII (Foreign Institutional Investors) used to denote an investor, mostly in the form of an institution established outside India.

Foreign Direct Investment (FDI) :- FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” or A foreign company having a stake in a Indian company.

Initial Public Offering (IPO) :- IPO is Initial Public Offering of shares to the general public from a company wishes to list on the stock exchanges.

Fiscal Deficit :- It is the difference between the government’s total receipts (excluding borrowings) and total expenditure.

More terminology to be continued soon…………………..