CRR, SLR , Repo , Reverse Repo Rates Definitions


Written on 12:39 PM by nitesh

These are taken from this site as its was posted by the author. Thanks to IAS mentor

Repo (Repurchase) Rate

Repo rate is the rate at which banks borrow funds from the RBI to meet the gap between the demand they are facing for money (loans) and how much they have on hand to lend.

If the RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.

Reverse Repo Rate

This is the exact opposite of repo rate.

The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate. The RBI uses this tool when it feels there is too much money floating in the banking system

If the reverse repo rate is increased, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest. As a result, banks would prefer to keep their money with the RBI (which is absolutely risk free) instead of lending it out (this option comes with a certain amount of risk)

Consequently, banks would have lesser funds to lend to their customers. This helps stem the flow of excess money into the economy

Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected.

Bank Rate

This is the rate at which RBI lends money to other banks (or financial institutions .

The bank rate signals the central bank’s long-term outlook on interest rates. If the bank rate moves up, long-term interest rates also tend to move up, and vice-versa.

Banks make a profit by borrowing at a lower rate and lending the same funds at a higher rate of interest. If the RBI hikes the bank rate (this is currently 6 per cent), the interest that a bank pays for borrowing money (banks borrow money either from each other or from the RBI) increases. It, in turn, hikes its own lending rates to ensure it continues to make a profit.

Call Rate

Call rate is the interest rate paid by the banks for lending and borrowing for daily fund requirement. Si nce banks need funds on a daily basis, they lend to and borrow from other banks according to their daily or short-term requirements on a regular basis.


Also called the cash reserve ratio, refers to a portion of deposits (as cash) which banks have to keep/maintain with the RBI. This serves two purposes. It ensures that a portion of bank deposits is totally risk-free and secondly it enables that RBI control liquidity in the system, and thereby, inflation by tying their hands in lending money


Besides the CRR, banks are required to invest a portion of their deposits in government securities as a part of their statutory liquidity ratio (SLR) requirements. What SLR does is again restrict the bank’s leverage in pumping more money into the economy.

Source of this post is : IAS Mentor

Great Depression - 1929


Written on 9:03 AM by nitesh

1. During the 20's after the WW-1 production rose in industries, but incomes didn't rise in a similar fashion
2. Top .1% income was equal to the bottom 42% of the population
3. There was a huge imbalance or maldistribution of wealth
4. Fed government cut tax rates specially of the rich people
5. Increased production created an increase in supply as compared to the demand
6. People specially the poor were encouraged to buy on credit
7. Other factor which kept the economy up was lavish spending or luxury spending by the top 1% rich people
8. There were only two major industries around which the whole of the economy revolved - Automobile industry and Radio industry
9. During the world war one farming was encouraged as whole of europe and america was to be fed. Farmers were given high prices and were asked to buy more and more land. After the war the policies changed , farmers debt increased and prices tumbled
10. Automobile and Radio industry fell as they couldn't expand after some extent and with 70% of the population dependent on agriculture economy fell apart
11. US tariffs were very high for other countries to export to US and global trade which could have lifted europe, australia after the world war-1 was not much relevant
12. Shares also went high on speculation from 100 - 420 and any person could buy shares on credit , e.g by investing his $10 and getting $75 on credit he could have brought shares. Return were very high due to speculation .......... markets went high and high and one day fell and due to panic all started selling their shares

Great Depression had begun ...................................................

It is a summary of the article i read



Written on 9:21 AM by nitesh

Government of India after the attacks on Mumbai have acted like never before in passing the two laws namely setting up of a National Intelligence Agency and Unlawful Activities Prevention Amendment Act in a matter of 2 weeks. I feel this must be the fastest a law has been made.

First of all what would be the functions of NIA:

• NIA is first of all will not be under the jurisdiction of State governments, It can take charge of terror activities without the consent of state concerned. CBI had to take permissions of the state government to act. So In short if will be like the Homeland security if we go to USA.
• NIA can set up special fast track courts for speedy trials.
(still searching for more functions.......)

• It denies bail to foreigners accused in terror cases e.g Kasav like people can be detained for longer duration.
• Bails to Indians will be granted only after courts hear the case.
• Another provision is if a person is found with explosives the onus will be on him to prove his innocence.
• Another important feature will be that the duration of the custody or remand is increased from 15 days to 30 days.

But again the questions arises setting up an law is not enough we need officers and money for new instruments. CBI, IB and CID are already short staffed. What is done nowadays in case of states is if any police officer is creating trouble for a VIP he is transferred to CID. This is not the right way we need right persons for the right job.
CBI is having shortage of 1/3rd of its staff, they say good applicants are hard to find by. Where are the funds to buy latest forensic equipments, to teach them about the cyber crime, to teach them about the new un conventional way used by terrorists?

We are trying to tackle the terror attacks by land, air and sea but what about attacks from cyber space. If we are attacked on a big scale say like websites of many banks getting hacked are we prepared for such attack.

Another issues is of budgeting FBI has a budget of around 7.1 billion dollars and on the contrary expenditure by central government on policing is just 3 billion dollars.

Strict terror laws are not the only way through which we can control terror. Though I agree that there was a need for the centralized agency to tackle menace like terror, but these laws should not go the way POTA and TADA went. Major causalities during these laws were the common men, they were caught by the police beaten, tortured to accept that they are terrorists.
Many students in Hyderabad were arrested, tortured and finally they were released by court after 6 months, but they lost their jobs and college admissions meanwhile.

Point is laws should not be misused. If we can control terror in Punjab we can control it everywhere, what is needed is will , free hand to the police officers, no more vote bank politics like removing the ban on SIMI.

We will get to know in few months whether this law and agency is helpful or its a just another notional agency with only name and without any members.

Fragile Indian Coasts


Written on 9:00 AM by nitesh

Recent attacks on Mumbai have raised concerns about the fragile coastline, Southern India which was supposed to be a safer from terrorist attacks is no longer safe now, thanks to the long fragile coastline. New agencies are coming up to tackle terror menace but the real problem lie somewhere else.

Indian fishermen while fishing mistakenly and intentionally cross the sea border to fish in sea waters of Pakistan. These poor are arrested there and their boats are captured. Some 200 Indian boats are missing, when Indian delegation visited Pakistan in the month of October and enquired about the boats, no one was willing to tell but somehow they came to know that the boats are auctioned at throw away prices. A 20 lakhs rupees boat is auctioned at around 2-3 lakhs. This is very dangerous in context of terror attacks as we all know the 10 terrorists who attacked Mumbai came to India via an Indian boat Kuber which was captured according to GPS signals in Pakistani waters.

Chances of Indian boat in Pakistani hands going unchecked are very bright. Casualness of Indian intelligence and Gujarat police is so high that they hardly care to question the fishermen who after spending 1-2 years in Pakistani jails return back to India.

Problem of Indian fishermen crossing over in Pakistani waters has increased in the last five years because of redrawing of the borders. Line was earlier parallel to Pakistani coast and perpendicular to Indian coast is now at an angle of 45 degrees. To our bad luck in the Pakistani waters lies the point where Indus valley delta meets the Arabian Sea abundant in fish, crabs etc. New borders have considerable decreased the fish abundant areas for Indian fishermen and as result many wander into Pakistani waters and are captured. Pakistan has caught 383 boats since 2003 of which 200 are missing and 183 are in dilapidated state.

So now the question arises why our agencies are not able to regulate fishing and keep a strict vigil on the fishermen and prevent them from wandering into Pakistani waters.

There is only one reason shortage of staff and equipments. Gujarat which has the longest coastline among the Indian states (1650kms) , has around 24000 mechanized boats and 5000 trawlers. As per the rules upto 12 kms Gujarat police guards them and from there on till 200kms its Indian coastguard. Other agencies are Gujarat Maritime board which gives certificates to the boats and customs which issues identity cards to the fishermen. A typical custom officer has around 200kms of area to manage, with only 150 staff and 3-4 vehicles. With such a shortage of manpower we cannot expect them to cross check the ids and other details.

A typical journey of fishing boat coasts around 1 lakh for 10 days and the crew is expected to come with a rich haul of fisheries to cover the cost of trip, salaries and profit. Such pressure is bound to take them to the Pakistani water which is abundant in fishes and crabs. Indian waters a polluted by pollutants from jamnagar refinery, tata chemicals, Gujarat alkalies and above all the ship breaking yard at alang has killed all the ships.

Gujarat coast guard is also very ill equipped having only 4 ships, 2 aircraft and 2 hovercrafts to manage the whole area. It takes 45 minutes to one hour to physically check a boat, so checking of all the boats is not possible. Only thing can be done is that proper ids are given after thorough checking and GPS installed on all the boats fishing be regulated by the coastal police. Fishing harbors and ports should be separated for security reasons.

7000 men coast guard of India is very short staffed to handle the 7500 kms long coastline of India.

There are enough laws and agencies in India. Passing of NIA might have brought the terrorism from state list into center list as well but the real problem is not the agencies but the short staffing in the agencies and lack of coordination among the existing ones.

This post is a summary of the cover story of current issue of Tehelka magazine.

Mumbai Blasts and Indian Government


Written on 9:25 AM by nitesh

The government of India has started taking actions after the 26/11 Mumbai blasts. Are these actions useful or helpful is a different matter. But first lets discuss what actions are being taken.

First was sacking of Shivraj Patil , and CM and Deputy CM of Mumbai. Few of these were expected specially the Patil one as the suit changing man was out of sorts in handling the home ministry. Other two went because of their own acts Deshmukh because of terror tourism and R.R Patil because of his incapability in handling those two ill fated days of blasts and his famous comment "Small things happen in big cities" led to his fall.

Other important thing done by India was using its foreign policy in putting pressure on Pakistan from other countries specially the US of A. Initially we all Indians became emotional and were emphasizing on the need for was but we later came to know was is not possible as US will not allow this to happen. US troops are already fighting in regions between Afghanistan and Pakistan borders in killing jihadi terrorists. Majority of Pakistani troops are stationed there and they are helping the Americans.

So diplomatic front is the only open front, even though we have contradictory statements, foreign minister stating that military option is open and defense minster saying other day military option is ruled out.

Pakistan what should I say about the terrorist nation of Pakistan is behaving in the same way as expected. One day they say they are not responsible for non state actors other day they say its their responsibility.

Time is ripe for India to maneuver its foreign policy and become procative now. We should do what Indira Gandhi did during the Bangladesh was, visiting many countries and gaining their confidence and backing of many countries. We should stop taking help for our matters and start depending less on America to help us in sorting our matters. This is not the way future superpowers should behave. There is a need for both soft power and hard power. If our soft power is expanding in form of yoga and curry we also need to show our hard power sometimes.
Following the 50-50 policy never helps, we should either be for or against and trying to create a middle way usually leads to failures.

Conscious of our VIP's has risen and most of them have started demanding less security cover which, has become a status symbol for the politicians. In yesterday's HT it was mentioned that 46,000 men guard 13,339 VIP's and if we cut on these numbers we can create 4 new NSG's and double Delhi or Mumbai police forces. But no lal batti culture has so creep down in our councious that its very difficult to do away with.
There is only one way in which it can be done its through supreme court. Jayalalita and Karunanidhi both are having Z+ security, I don't understand why do they need such security cover, they have never received any threat, they only fear each other :) . Mulayam Singh supported the UAP in saving the government so he was given Z+ security. Every government goes this way, there is no way to decide whom to be given Y,Z,Z+ security. This is wastage of so much tax payers money.

NIA is next ......

Related Posts:
Control Terror Solutions 1
Control Terror Solutions 2

Some More Solutions to the Terrorism Problems


Written on 10:28 AM by nitesh

Carrying forward my earlier post on steps to control terrorism in India , i after reading a lot , watching a lot of news channels and above all thinking a lot come up with few more solutions.

Eighth Point
Stop the funding of terrorism, its difficult but not impossible, most of the funding is done via poppy and opium crop which is grown in Afghanistan. If that can be curbed I think a major part of their funding for latest weapons will be affected

Ninth Point
Stop wastage of so much resources on our elite politicians like giving them so many NSG commandos, around 2500 are for their security out of the total of 10-12K NSG commandos.

Tenth Point
Raise salaries of Police officers, politicians pass the bill for their salary hike with full majority, salary should be hiked of police officers also , i feel it may to some extent stop bribing etc.

Eleventh Point
Smart people for intelligence agencies like RAW, IB , CID, CBI etc. Right now what is done is that if a politician is having problem with any officer he is transferred to CID office or CBI office. This is not the right way, funda of right man for right job just like in our armed forces should be followed.

Twelfth Point
The citizens should be given the option of show their protest against a canditate by using the option 'vote for none' . This will show our resentment towards the candidates and may put pressure on politicians also. See section 49-O

Thirteenth Point
Monitoring is required, as we now how valuable information is being provided by the CCTV footage installed in railway stations, so huge investment is required to install CCTV's and other modern equipments in public places and places of importance.

More points will be added

Indian Politicians again proove that they are out of their minds


Written on 11:03 AM by nitesh

Now the star is Kerela CM , 80 year old war horse who has really lost his mind and need some much needed rest.
His latest comment which I don't have words to describe that pathetic, pitiful, pitiable, piteous, lamentable some of the words i took from web.

His Comment:
"If it had not been (Major) Sandeep's house, not even a dog would have glanced that way."

This is age old problem of out politicians as they think that if they occupy some high post they are gods nobody can deny them anything they can get what they want, the 80 year something old warhorse slowly loosing his mind was shocked when he had to face the opposite of what he was expecting.
This happens ever where in my native state haryana in earlier government regime if any minister liked something they asked that person to give it to them. I remember one incident which became famous one minister liked the car of a person so he took keys from that business man and give it to one of his son as birthday gift, that unlucky businessman had to go back on autorikshaw.

My point is age old mindset that politics is for making money and once you become a minister you are god nobody can say no to you is wrong. Time is over for such mindset, slowly and gradually India is getting educated despite strong efforts by politicians to keep India illiterate so that their vote bank doesn't get affected as we know educated people will ask answers from the vote minded politicians.

Indian IT Companies Measures in Recession


Written on 4:19 PM by nitesh

Ya It seams that the good timings are over now in IT world and now the time has come for youngsters to look beyond IT. There are many reasons for that one of the major is the IT labors number have increase so much that they are always looked downwards where ever they go be it for higher technical education or an mba. Ohh you are just another IT engineer in India, there is shortage of people in other streams in India be it mechanical or electrical.

Recession (some big shot management people call it regression in my office :D ) has taken a heavy toll everywhere, companies are going for drastic measures below are some of the following:

  • No need for flexi timings from now, company comes first employee later. Even though if employee is giving full productive hours.
  • Subsidy has been removed from bus , cab and lunch. Lunch charges in my company are not 1050 from 450, cab charges are 4500 and bus charges are 3000. All these are monthly charges. Every thing has been raised more then 70% apart from the salary. This is in case of companies which are no way near to getting affected by recession as they hardly have any financial clients.
  • Working hours getting increased in most of the companies from 8.30 to 9.30 hours
  • I am afraid they don't come up with the pathetic idea of working on Saturday, if they come than it will be their loss as in IT people are so stressed out over the week days working for late hours and if Saturday is made working than the culture of government style working will peep in i.e no more staying late.
  • Every one is being monitored nowadays from intelligent managers to useless coders.
  • Its very good times for HR people this is not my brain speaking but what i see here in my office, change daily birthday posters and keep the notice boards up2date, I have never seen them interact with any employee about how are you working.
There are many advantages of working in small company as you see and observe things very closely which you wouldn't have noticed in a big company, you learn a lot of things and you skip a lot of things which you could have learnt in a biggie.

These are tough times and we will get through them in one year or two. But now is the right time to enhance our other skills apart from technical skills be it communication skills or evaluation skills.

Every cloud has a silver linning and there is darkness before dawn sets in so this is a learning phase for me also in starting of my career that these kind of things can come and you have to come up with innovative ways to tackle them. Tested and implemented ways are not always successfull.