What is meant by Cash reserve ratio and Repo rate?

Question:

“Sir, I am unable to understand certain economic terms like “Cash Reserve Ratio” and “Repo rate”. Can you please explain them. Yamini from Delhi “ 

Reply from Author:

I am happy to help you at the same time Please read our Banking terms Help materials

Cash reserve ratio:
This is also known as cash asset ratio or liquidity ratio. If a particular bank receives 100 Rs then it will decide on the percentage of amount it should hold and the percent of amount it should lend out. The rest should be deposited to the RBI. This ratio is known as CRR

Repo Rate:
Ok now you know that the banks lend out some money to us for loans and what if the banks suddenly fall short of money?
They will borrow it from RBI. The rate at which the banks borrow rupees from the RBI is called as Repo Rate. If the Repo rate is low Banks will get funds cheaply and if Rate is high then thee banks will get the money at higher interest and ultimately end users will get it at a higher interest rate.
Hope this clarifies.
 

To all others who want to help Yamini by providing her some tips, please contribute in the comments section. If you have a similar question, please don’t hesitate to ask me.