Banking related General awareness: Important Rate definitions
Candidates aspiring to enter into
the banking industry are expected to be well versed with the basic terminology
of banking. Here is a video which explains the four main terms in banking in
ample detail.
Bank Rate (Discount Rate):
The rate at which banks
borrow money from RBI for a long period of time.
It's the rediscounted
rate on the discounted government securities at which banks borrow money from
RBI for a long time (around 5 years).
Bond:
An agreement, also
called as a security. It is of two types:
- Coupon Bond: Issued only by
private firms
- Zero Coupon Bond: Issued only
by the government
Repo Rate:
Stands for repurchase
option rate. Repo Rate is the rate at which the RBI lends money to the
commercial banks within the country for a short period of time.
Reverse Repo Rate:
Reverse Repo Rate is the
rate at which the RBI borrows from commercial banks within the country for a
short period of time.
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