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"RBI cuts statutory liquidity ratio by 50 bps to release Rs 39,000 crore of liquidity for banks", The Economic Times, 3 June 2014. "Latest RBI Master Circular on Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)" , Reserve Bank of India , 1 July 2011 .
Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money through repurchase agreements (repos) that is primarily used by the Reserve Bank of India (RBI). [ 1 ] The LAF is used to aid banks in adjusting the day to day mismatches in liquidity .
This rate is commonly referred to as the cash reserve ratio or shortened as reserve ratio. Though the definitions vary, the commercial bank's reserves normally consist of cash held by the bank and stored physically in the bank vault (vault cash), plus the amount of the bank's balance in that bank's account with the central bank.
In 2010, the UK Financial Services Authority (FSA) introduced a new liquidity regulation known as the Individual Liquidity Guidance (ILG). In 2013, the Basel Committee on Banking Supervision agreed on a Liquidity Coverage Ratio (LCR), which is similar in design to the ILG but plays a role in an international playing field.
Basel III requires banks to have a minimum CET1 ratio (Common Tier 1 capital divided by risk-weighted assets (RWAs)) at all times of: . 4.5%; Plus: A mandatory "capital conservation buffer" or "stress capital buffer requirement", equivalent to at least 2.5% of risk-weighted assets, but could be higher based on results from stress tests, as determined by national regulators.
In addition to changes in capital requirements, Basel III also contains two entirely new liquidity requirements: the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR). On October 31, 2014, the Basel Committee on Banking Supervision issued its final Net Stable Funding Ratio (it was initially proposed in 2010 and re-proposed ...
Prior to the 1991 financial reforms, RBI's major source of funding and control over credit and interest rates was the cash reserve ratio (CRR) and the SLR (Statutory Liquidity Ratio). But after the reforms, the use of CRR as an effective tool was deemphasized and the use of open market operations increased.
In monetary economics, the money multiplier is the ratio of the money supply to the monetary base (i.e. central bank money). If the money multiplier is stable, it implies that the central bank can control the money supply by determining the monetary base.