ARTICLE (Banking Awareness)

All about Repo, Reverse Repo, MSF and Garnishee order...

Repo Rate: Agr banks for kuch paise chahiye to security de kar rbi se paise le leti hai bank short term(within 90 days) ke liye... Iska interest rate isliye important hai kyuki wo paisa bank lend karti hai jisse unka profit hota hai...chahe wo koi bhi loan de...

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Repo Rate: It is the rate at which bank borrows addition money required for it's business for short term period(2>90 days) like in providing loans to their customers.... Interest rate is imp because on the basis of this rate Bank use to manage their lending rates to their customers.... security is required for taking this money from RBI.

Reverse Repo Rate: Ye kuch nahi hai bas Repo ka ulta hai...matlb kisi bank ke paas extra paisa hai aur unke kaam ka nahi hai to wo RBI ke paas rakh deti hai.... uspe rbi jo interest deti hai wahi hai reverse repo rate...isliye iska rate humesh Repo rate se kam hota hai.... It is just like hum savings account jo khulwate hai bank me...jo extra paisa hum rakhte hai....bas...simple.

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Reverse Repo: It nothing but opposite of Repo i.e. when banks have extra money in their system what they will do with that money ? just like we do keep in our savings account with any bank, Banks also have their account with RBI.... Extra money deposited there entitled them of getting some interest known as Reverse Repo.... that is the reason it is always 1% less than Repo rate.. as we know lending rate is higher than borrowing rate....

MSF: jo banks SLR maintain karti hai uske liye kuch funds short pad jaye to banks call money mkt se le leti hai bt socho agr call money mkt me bhi paisa available na ho ya kisi ko na mil paye to wo bank kya karegi ? kaha se paise layegi ? uske liye RBI ek window open karti hai usko kehte hai MSF(marginal standing facility). Isliye kabhi bhi dekhta iska rate aur call money ka rate almost same hoga... call money jaise overnight money hota hai usi tarah ye bhi overnight hota hai...

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MSF: Just like banks have to maintain SLR on their NDTL and any shortfall of that fund is being taken from Call money market. But just think what if any bank is not able to arrange funds from call money market due to any reason ? Here comes the role of MSF (marginal standing facility). It is an emergency window opened for banks to borrow for their overnight funds.... U will always notice that Call money rate n MSF would nearly same.... this is the reason...as it is linked to call money only....

Garnishee Order:

--->> Maan lo main ek retailer hu aur Sakura ek wholeseller. But obvious hai mujhe goods credit pe milega wholeseller se.... maine usko koi bhi security nahi diya hai...mere good faith me usne goods bhej diya... ab suppose for any reason i refused to pay the money to Sakura...jiska reason kuch bhi ho sakta hai.. Ab Sakura kya kar sakti hai ?

Sakura Court jaegi waha ye matter daalegi. Court ek order degi jisko bolte hai Garnishee order. wo order lekar sakura jaha mera current account hai business ka us bank me jaegi... Suppose mera due 5000 ka hai aur mere account me 10000 pada hai...to bank 5000 freeze kar degi tab tk jab tk court se final order na aa jaye ki actually fault kiska hai...

so overall main apne account se 5000 hi use kar paunga jb tk final order na aa jaye...

# Thanks to Kd for such an informative post...!!