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JNANA VARDHINI SIBSTC MONTHLY NEWSLETTER -COVERING CONTEMPORARY BANKING RELATED TOPICS 32 ND ISSUE MARCH - 2013 SOUTHERN INDIA BANKS’ STAFF TRAINING COLLEGE No.531, Faiz Avenue, 11th Main, 32nd Cross IV Block, Jayanagar, BANGALORE-560 011 Website: www.sibstc.edu.in Email: [email protected] [email protected] 1 BALANCE OF PAYMENT ( BoP) Meaning and Importance: All nations prepare and publish statistics about their transactions with the rest of the world. A systematic accounting record of economic / monetary transactions between a country with the rest of the world is part of its BoP. These transactions include payments for the country's exports and imports of goods, services, financial capital and financial transfers. The BoP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). BoP statement is based on double entry book keeping in which each economic transaction gives rise to a credit and a debit. The BoP for a country is the sum of Current Account, the Capital Account, and the change in the Official Reserves. Current Account The current account shows the trade position of the country. The Current Account is the sum of net sales from goods and services, net factor income (such as interest payments from abroad) and net unilateral transfers from abroad. Positive net sales from abroad corresponds to a current account surplus and negative net sales from abroad corresponds to a Current Account Deficit (CAD) Capital Account Where current account shows the trade, capital account can be thought of as the investments part of the international transactions. This is further broken out into equity and debt investment and the FII money and FDI money is part of the equity investments while the external commercial borrowings, money deposited in banks by NRIs and trade credits are debt investments. 2 Official Reserve Account: It records the government’s current stock of reserves. Reserves include official gold reserves, foreign exchange reserves, and IMF Special Drawing Rights (SDRs) Structure of BoP Credits A. CURRENT ACCOUNT Debits Net I Merchandise II. Invisibles( a+b+c) (a). Services (b). Transfers (c). Income Total Current Account (I + II) B. CAPITAL ACCOUNT 1. Foreign Investment 2. Loans 3. banking Capital 4. Rupee debt service 5. Other capital OVERALL BALANCE OF A & B Monetary Movements: (i). IMF (ii). Foreign Exchange ( increase or decrease) Reserve Balance of Trade: The balance of trade, or net exports, is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports. A positive balance is known as a trade surplus if 3 it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap. The balance of trade is sometimes divided into a goods and a services balance. CURRENT ACCOUNT DEFICIT (CAD) Definition of CAD The current account balance is the difference between the export and import of the two trades. If imports are more than exports then the current account is in deficit. This deficit is usually measured as a percentage of GDP. India's Current Account situation: Balance of Payments 2010/11 2011/12 (USD billion) Exports 250.5 309.8 37.4 23.7 381.1 499.5 26.8 31.1 105.1 155.6 (y-o-y growth) 20.6 48.1 - Gold 40.5 56.5 (y-o-y growth) 41.4 39.5 (-) 130.5 (-) 189.8 (-) 45.9 (-) 78.2 62.0 67.8 (-) 13.1 12.8 14.6 16.5 (y-o-y growth) Imports (y-o-y growth) Of which - Oil Trade Balance Current Account Deficit Capital Flows Reserve Charge As % of GDP Exports 4 Imports 22.3 26.7 Trade Balance (-) 7.6 (-) 10.1 CAD (-) 2.7 (-) 4.2 Excluding gold (net) (-) 0.7 (-) 1.5 Excluding oil and gold (net) 3.0 3.8 Capital Flows 3.6 3.6 India runs a large trade deficit; that is, its imports exceed exports. Some of this trade deficit is covered by the surplus on the invisibles side -- largely IT exports and remittances by Indian workers overseas --leaving India with a net deficit on the current account. This deficit is expected to have widened to 4% of GDP in 2011-12 from 2.7% in the year before. India’s current account deficit (CAD) touched a record high of $ 32.6bn or 6.7% of gross domestic product for the quarter to December 2012. This deficit occurred because more money was paid out of India than brought into the country. If a country primarily imports more than it exports, it runs a current account deficit. Implications of CAD As long as India continues to import crude oil and gold, India cannot have Current account Surplus. That means India is doomed to have current account deficit for the years to come. Deficit on the current account means a net outflow of foreign exchange. In India's case, this means a dollar outgo. Such a deficit could exhaust a country's forex reserves if inflows to make up the deficit do not materialize. Therefore, a country with a current account deficit has to attract capital flows, which could be in the form of, say, foreign direct investment, to meet the shortfall. But when capital flows are insufficient to meet the deficit, the country's currency starts to depreciate on concerns that it may find it difficult to meet its international commitment or fund its current purchases. This is why a current account deficit in excess of 2.5% of GDP is seen as worrisome in case of India. In the last fiscal, despite getting higher capital 5 flows, the country is likely to have an overall BoP deficit because of much higher current account deficit. Quality of India’s imports is worrying: An economy that is growing at a faster clip than other nations has high imports and usually runs a current account deficit. The RBI Governor has expressed concern about the quality of imports. He argued that if a country imports more capital goods, it means there is an increase in the economic activity. Companies import capital goods equipment only when they expand capacities. However, India’s imports primarily include oil and gold. These two commodities do not help any manufacturing and export growth. India’s oil imports rose despite an overall economic slowdown. India also continued to import gold as demand stayed high. This was despite the additional duties imposed on import of gold. No signs of exports growth: India’s current account deficit (CAD) touched a record high of $ 32.6bn or 6.7% of gross domestic product for the quarter to December 2012. This is the excess value of imports over exports. India’s exports fell marginally due to an overall slowdown in demand for goods and services overseas. With overall slowdown in the global economy, there are few signs of a sharp surge in exports. Impact on the Rupee: A high current account deficit puts pressure on the value of the rupee. However, the Indian rupee has not witnessed a sharp fall so far. This is due to strong flows from foreign institutional investors into equity markets as well as foreign direct investment by companies. This largely finances the current account deficit. The RBI also ensures that the rupee does not fall sharply, as this could increase the inflation in the economy. It conducts periodic ‘intervention’ in the foreign exchange markets by selling foreign currency and buying the rupee. India’s External Debt: $ 376bn: India’s total external debt stood at $ 376bn as December 2012, according to RBI data. A high growth economy usually witnesses a rise in borrowing. However, the worrying factor is the quality of the borrowing. The short-term debt, the borrowing with a term of less than one year, rose to $ 92bn or 5% of GDP. This means the country could 6 potentially see an outflow of money in less than a year and could put a downward pressure on the Indian rupee. A sharp fall in the Indian rupee could add to high inflation. RBI’s three Concerns about CAD: There are mainly three concerns about the CAD in the balance of payments: (i) the quantum of CAD; (ii) the quality of CAD; and (iii) the financing of CAD Quantum of CAD Reserve Bank’s estimates show that the sustainable CAD for India is 2.5 per cent of GDP. A CAD above the sustainable level, year after year, is a clear macroeconomic risk as it raises concerns about our ability to meet our external payment obligations and erodes the confidence of potential lenders and investors. An additional concern is that we are having a large CAD even in the face of slowing growth. This is perplexing because economic logic suggests that the CAD should improve in a slowing economy due to a decline in import demand. Cross country evidence in fact supports this hypothesis. Such an adjustment has not manifested in India though because: (i) oil and gold imports are relatively inelastic to income changes; (ii) on non-oil imports, domestic supply is still unable to compete with imports, and (iii) supply constraints and subdued external demand are impeding exports. Quality of CAD The concern about the quality of CAD arises from the composition of imports. If we were importing capital goods, we can maybe countenance a higher CAD because investment in capital goods implies building production capacity for tomorrow. On the other hand, import of gold, largely as a hedge against inflation, is a deadweight burden, especially at a time when the CAD is beyond the sustainable level. 7 Financing of CAD Even as the CAD has been high, we have been able to finance it because of a combination of ‘push’ and ‘pull’ factors. On the push side is the amount of surplus liquidity in the global system consequent upon the extraordinary monetary stimulus provided by advanced economy central banks. On the pull side are the measures taken by India to attract capital flows such as liberalizing FDI, expanding the limits for foreign investment in corporate and government debt and easing restrictions on external commercial borrowing by corporates. In trying to finance such a large CAD, we are exposing the economy to the risk of sudden stop and exit of capital flows. This will be the case to the extent capital flows in pursuit of short-term profits. Should the risk of capital exit materialize, the exchange rate will become volatile causing knock-on macroeconomic disruptions. Managing the Political Economy of Fiscal Consolidation The large fiscal deficit of the government remains one of India’s biggest macroeconomic challenges. Received wisdom today is that it was the fiscal profligacy of the 1980s that spilled over into the external sector and fuelled the balance of payments crisis of 1991. In 2011/12, the combined fiscal deficit of the centre and state governments was 8.1 per cent, quite close to the figure of 9.1 per cent in the BoP crisis year of 1990/91. Quite understandably, there are concerns about the adverse macroeconomic consequences of the twin deficit problem - a large and persistent fiscal deficit along with a high CAD. In the pre-crisis period, India’s fiscal consolidation was largely on track, consistent with the targets adopted under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. However, this consolidation got interrupted by the crisis induced fiscal stimulus. Thereafter, the government adopted a revised road map for getting fiscal consolidation back on track, and adhered to the target in 2012/13. Nevertheless, the combined fiscal debit of the centre and states, budgeted at 7.2 per cent of GDP during 2012/13 is still high. Notwithstanding political economy compulsions, credible fiscal 8 adjustment along a transparent, predictable road map is an imperative for growth and macroeconomic stability. Measures that Government can adopt: India's large current account deficit has been fuelled by heavy gold and crude oil imports. The rupee depreciation has served as an automatic check on gold imports by making the yellow metal expensive. Although crude is softening, the potential benefit may not materialize because of a slowdown in merchandise exports. As a result, the current account deficit is expected to drop only marginally to about 3.5% of GDP. For a sharper decline, India will need to push exports and slow down consumption imports such as fuel and gold. Raising diesel prices, for instance, will help curb demand. The RBI Governor said last month that the sustainable CAD for India is 2.5% of GDP. Finance minister has said that such a high current deficit was ‘worrying’. This has raised concerns over the impact on the economy. NON BANKING FINANCIAL COMPANY (NBFC) Definition of NBFC: A NBFC is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of 9 contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company). Difference between banks & NBFCs: (i). NBFC cannot accept demand deposits. (ii). NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. (iii). Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks. Registration of NBFC with RBI: In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial company can commence or carry on business of a non-banking financial institution without: (i). Obtaining a certificate of registration from the RBI and without having a Net Owned Funds of Rs. 200 lakhs. (ii). However, in terms of the powers given to the RBI, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982, Housing Finance Companies regulated by National Housing Bank , Stock Exchange or a Mutual Benefit company. Different types/categories of NBFCs registered with RBI: (A) Deposit and Non-Deposit accepting NBFCs, (B). Non deposit taking NBFCs 10 Within this broad categorization, the different types of NBFCs are as follows: (i). Asset Finance Company (AFC) : An AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising there from is not less than 60% of its total assets and total income respectively. (ii). Investment Company (IC): IC means any company which is a financial institution carrying on as its principal business the acquisition of securities. (iii). Loan Company (LC): LC means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company. (iv). Infrastructure Finance Company (IFC) : IFC is a non-banking finance company a) which deploys at least 75 per cent of its total assets in infrastructure loans, b) Has a minimum Net Owned Funds of Rs. 300 crore, c) Has a minimum credit rating of ‘A ‘or equivalent and d) CRAR of 15%. (v). Systemically Important Core Investment Company (CIC-ND-SI): CIC-ND-SI is a NBFC carrying on the business of acquisition of shares and securities which satisfies the following conditions:- 11 (a). It holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies; (b). Its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its Total Assets; (c). It does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment; (d). It does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies. (e). Its asset size is Rs 100 crore or above and it accepts public funds (vi). Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC): IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. IDF-NBFC raise resources through issue of Rupee or Dollar denominated bonds of minimum 5 year maturity. Only Infrastructure Finanace Companies (IFC) can sponsor IDF-NBFCs. (vii). Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI): NBFC-MFI is a non-deposit taking NBFC having not less than 85% of its assets in the nature of qualifying assets which satisfy the following criteria: (a). Loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding Rs. 60,000 or urban and semi-urban household income not exceeding Rs. 1,20,000; (b).Loan amount does not exceed Rs. 35,000 in the first cycle and Rs. 50,000 in subsequent cycles; 12 (c). Total indebtedness of the borrower does not exceed Rs. 50,000; (d). Tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 15,000 with prepayment without penalty; (e). Loan to be extended without collateral; (f). Aggregate amount of loans, given for income generation, is not less than 75 per cent of the total loans given by the MFIs; (g). Loan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower (viii). Non-Banking Financial Company – Factors (NBFC-Factors): NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring. The financial assets in the factoring business should constitute at least 75 percent of its total assets and its income derived from factoring business should not be less than 75 percent of its gross income. Acceptance of Deposits by NBFCs: All NBFCs are not entitled to accept public deposits. Only those NBFCs to which the RBI has given specific authorization are allowed to accept/hold public deposits. Ceiling on acceptance of Public Deposits: There is a ceiling on acceptance of Public Deposits by NBFCs authorized to accept deposits as under: (i). NBFCs having minimum NOF of Rs 200 lakhs 1.5 times of NOF or Rs 10 crore whichever is less AFC -CRAR of 12% and having minimum 4 times of NOF investment grade credit rating LC/IC with CRAR of 15% and having minimum 1.5 times of NOF AFC - CRAR of 15% without credit rating investment grade credit rating 13 (ii). NBFCs having NOF more than Rs 25 lakh but less than Rs 200 lakh: AFCs maintaining CRAR of 15% without credit Equal to NOF rating AFCs with CRAR of 12% and having minimum 1.5 times of NOF investment grade credit rating LCs/ICs with CRAR of 15% and having Equal to NOF minimum investment grade credit rating Ceiling on Interest rates on Deposits: Presently, the maximum rate of interest NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests. The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors. NRI - NBFCs Deposits: NBFCs cannot accept deposits from NRIs except deposits by debit to NRO account of NRI provided such amount does not represent inward remittance or transfer from NRE/FCNR (B) account. Nomination Facility for NBFC Deposits: Nomination facility is available to the depositors of NBFCs. (Source RBI FAQ) Bank Finance to NBFCs registered with RBI (Source RBI Master circular) The ceiling on bank credit linked to Net Owned Fund (NOF) of NBFCs has been withdrawn in respect of all NBFCs which are statutorily registered with RBI and are engaged in principal business of asset financing, loan, factoring and investment activities. Accordingly, banks may extend need based working capital facilities as well as term loans to all NBFCs registered with RBI and engaged in infrastructure financing, 14 equipment leasing, hire- purchase, loan, factoring and investment activities. Banks may also extend finance to NBFCs against second hand assets financed by them. Banks may formulate suitable loan policy with the approval of their Boards of Directors within the prudential guidelines and exposure norms prescribed by the RBI to extend various kinds of credit facilities to NBFCs subject to the condition that certain activities are not financed by them. Bank Finance to NBFCs not requiring Registration In respect of NBFCs which do not require to be registered with RBI, viz. i) Insurance Companies registered under Section 3 of the Insurance Act, 1938; ii) Nidhi Companies notified under Section 620A of the Companies Act, 1956; iii) Chit Fund Companies carrying on Chit Fund business as their principal business as per Explanation to Clause (vii) of Section 45-I(bb) of the Reserve Bank of India Act, 1934; iv) Stock Broking Companies / Merchant Banking Companies registered under Section 12 of the Securities & Exchange Board of India Act; and v) Housing Finance Companies being regulated by the National Housing Bank (NHB) which have been exempted from the requirement of registration by RBI], banks may take their credit decisions on the basis of usual factors like the purpose of credit, nature and quality of underlying assets, repayment capacity of borrowers as also risk perception, etc. Bank Finance to Residuary Non-Banking Companies (RNBCs) Residuary Non-Banking Companies (RNBCs) are also required to be mandatorily registered with RBI. In respect of such companies registered with RBI, bank finance would be restricted to the extent of their Net Owned Fund (NOF). Activities not Eligible for Bank Credit (i). Bills discounted / rediscounted by NBFCs, except for rediscounting of bills discounted by NBFCs arising from sale of (ii) Investments of NBFCs both of current and long-term nature, in any company / entity by way of shares, debentures, etc. However, Stock Broking Companies may be 15 provided need-based credit against shares and debentures held by them as stock-intrade. (iii) Unsecured loans / inter-corporate deposits by NBFCs to / in any company. (iv) All types of loans and advances by NBFCs to their subsidiaries, group companies / entities. (v) Finance to NBFCs for further lending to individuals for subscribing to Initial Public Offerings (IPOs) and for purchase of shares from secondary market. Leased and Sub-Leased Assets As banks can extend financial assistance to equipment leasing companies, they should not enter into lease agreements departmentally with such companies as well as other Non-Banking Financial Companies engaged in equipment leasing. Bank Finance to Factoring Companies Banks can extend financial assistance to support the factoring business of Factoring Companies which comply with the following criteria: a. The companies carry out all the components of a standard factoring activity, viz., financing of receivables, sale-ledger management and collection of receivables. b. They derive at least 80 per cent of their income from factoring activity. c. The receivables purchased / financed, irrespective of whether on 'with recourse' or 'without recourse' basis, form at least 80 per cent of the assets of the Factoring Company. d. The assets / income referred to above would not include the assets / income relating to any bill discounting facility extended by the Factoring Company. e. The financial assistance extended by the Factoring Companies is secured by hypothecation or assignment of receivables in their favour. 16 Other Prohibitions on Bank Finance to NBFCs Bridge loans / interim finance Banks should not grant bridge loans of any nature, or interim finance against capital / debenture issues and / or in the form of loans of a bridging nature pending raising of long-term funds from the market by way of capital, deposits, etc. to all categories of NonBanking Financial Companies and also Residuary Non- Banking Companies (RNBCs). Banks should strictly follow these instructions and ensure that these are not circumvented in any manner whatsoever by purport and / or intent by sanction of credit under a different nomenclature like unsecured negotiable notes, floating rate interest bonds, etc., as also short-term loans, the repayment of which is proposed / expected to be made out of funds to be or likely to be mobilized from external / other sources and not out of the surplus generated by the use of the asset(s). Advances against collateral security of shares to NBFCs Shares and debentures cannot be accepted as collateral securities for secured loans granted to NBFCs borrowers for any purpose. Restriction on guarantees for placement of funds with NBFCs Banks should not execute guarantees covering inter-company deposits / loans thereby guaranteeing refund of deposits / loans accepted by NBFCs / firms from other NBFCs / firms. The restriction would cover all types of deposits / loans irrespective of their source, including deposits / loans received by NBFCs from trusts and other institutions. Guarantees should not be issued for the purpose of indirectly enabling the placement of deposits with NBFCs. Prudential ceilings for exposure of banks to NBFCs The exposure (both lending and investment, including off balance sheet exposures) of a bank to a single NBFC / NBFC-AFC (Asset Financing Companies), which is not predominantly engaged in lending against collateral of gold jewellery, should not exceed 10% / 15% respectively, of the bank's capital funds as per its last audited balance sheet. 17 Banks may, however, assume exposures on such a single NBFC / NBFC-AFC up to 15% / 20% respectively, of their capital funds provided the exposure in excess of 10% / 15% respectively, is on account of funds on-lent by the NBFC / NBFC-AFC to the infrastructure sector. Further, exposure of a bank to the NBFCs-IFCs (Infrastructure Finance Companies) should not exceed 15 per cent of its capital funds as per its last audited balance sheet, with a provision to increase it to 20 per cent if the same is on account of funds on-lent by the IFCs to the infrastructure sector. Banks may also consider fixing internal limits for their aggregate exposure to all NBFCs put together. The exposure (both lending and investment, including off balance sheet exposures) of a bank to a single NBFC which is predominantly engaged in lending against collateral of gold jewellery (i.e. such loans comprising 50 per cent or more of their financial assets), should not exceed 7.5 per cent of banks’ capital funds. However, this exposure ceiling may go up by 5 per cent, i.e., up to 12.5 per cent of banks’ capital funds if the additional exposure is on account of funds on-lent by such NBFCs to the infrastructure sector. Banks should have an internal sub-limit on their aggregate exposures to all NBFCs, having gold loans to the extent of 50 per cent or more of their total financial assets, taken together. This sub-limit should be within the internal limit fixed by the banks for their aggregate exposure to all NBFCs put together as prescribed in paragraph 8.2 above. Infusion of capital funds after the published balance sheet date may also be taken into account for the purpose of computing exposure ceiling. Banks should obtain an external auditor's certificate on completion of the augmentation of capital and submit the same to the RBI before reckoning the additions to capital funds. 18 Restrictions regarding investments made by banks in securities / instruments issued by NBFCs Banks should not invest in Zero Coupon Bonds (ZCBs) issued by NBFCs unless the issuer NBFC builds up sinking fund for all accrued interest and keeps it invested in liquid investments / securities (Government bonds). Banks are permitted to invest in Non-Convertible Debentures (NCDs) with original or initial maturity up to one year issued by NBFCs. However, while investing in such instruments banks should be guided by the extant prudential guidelines in force, ensure that the issuer has disclosed the purpose for which the NCDs are being issued in the disclosure document and such purposes are eligible for bank finance in terms of instructions given in the preceding paragraphs. RBI POLICY RATES SLR CRR Bank Rate Repo Reverse Repo Marginal Standing Facility Rate 23.00% 4% 8.50% 7.50% 6.50% 8.50% 19