Sunday, October 4, 2015

Banking Terminology Made Easy-1

Santa: I have heard recently that Mr. Rajan has reduced Repo Rate by 50 basis points and everyone is saying that this is good for the market. Loan EMI may also come down. What is this rate cut means actually? I want to understand this.
Banta: To understand this you first need to know, how does a bank function.
Santa: Why?
Banta: Because all these are inter-related. Tell me – what does a bank do?
Santa: Bank takes money from depositors and gives loan to earn interest. That way they keep everyone happy and make a profit also.
Banta: Correct, but there are more to it. Let me explain this in a very simplistic way. Bank needs money. Bank can get money from depositors like you and me and also from RBI. But bank also needs to pay certain interest to us and also to RBI.
Santa: Ok.
Banta: Let us try to understand first – what happens when we deposit, say, Rs. 100 with a bank.
Santa: I know that. Bank gives that Rs. 100 to someone who needs a loan.
Banta: No, it is not that simple. Remember, though bank can earn interest by giving away loans, but it is also very risky. There are many cases of loan defaults. This way banks can put all our money into high risk areas. It has to be protected.
Santa: How?
Banta: Ok, RBI has made it mandatory that upon receiving, say, Rs. 100 – banks first have to deposit Rs. 4 with RBI. RBI keeps this Rs. 4 in its current a/c and hence banks do not receive any interest on this money. This is known as Cash Reserve Ratio or CRR, which is currently at 4%.
Santa: Hmmm, then?
Banta: RBI has also made it mandatory that upon receiving, say, Rs. 100 – banks need to compulsorily buy central and state govt. securities of Rs. 21.50. Of course banks will earn some interest income here. This is known as Statutory Liquidity Ratio (SLR), which is currently at 21.50%.
Santa: Ok, so you mean to say that upon receiving Rs. 100, banks can spend only Rs. 74.50 at its own will.
Banta: Correct. 100 – (4 + 21.50) = 100 – 25.50 = 74.50
Santa: But you were saying that banks can also borrow from RBI. What interest banks pay to RBI?
Banta: Before 30th September, banks were paying 8.25% interest to RBI when it borrows money from RBI. Now this rate has been reduced by 50 basis points. So banks now need to pay interest to RBI, if it borrows from RBI, at the rate of 7.75%. This is known as Repo Rate.
Santa: Can fixed deposit rate be affected by reduction of Repo Rate?
Banta: Of course. If banks get money from RBI @7.75%, why will banks pay higher interest to you and me? One year FD rate is already revised by many banks and it is equal to or very close to 7.75%.
Santa: But as now banks are getting money at a cheaper rate, then they should reduce the loan interest rate i.e. passing on the benefits it receives.
Banta: Correct. They should. And on that hope market is cheering. If companies get loan at a cheaper rate, they will likely to expand their businesses. That will create more jobs, more income and boost the economy.
Santa: How is inflation linked to this?
Banta: See, when loan becomes cheaper, people tends to borrow more. That means people will have more money to spend. This will increase the demand for goods, and if supply does not increase to match this demand, then prices will increase.
Santa: So there is a chance, that inflation may rise also?
Banta: Well, yes. But inflation depends on many other factors as well, like production (industrial and agricultural), manufacturing, export – import, foreign currency movement etc. So inflation may increase or may not.
Santa: One last question. Like we deposit our money with banks, can banks also deposit their money with someone?
Banta: Yes, they can deposit with RBI and earn interest too. This interest is typically 1% less than the repo rate. This rate is known as Reverse Repo Rate.
Santa: Great! So now I understand CRR, SLR, Repo Rate, Reverse Repo Rate and their impact on deposit rate, loan interest rate and on inflation. Thanks.
Banta: Welcome!
................ Santa Banta can be very informative as well. ��


Thursday, October 1, 2015

Learn English Online | Articles


The words a, an, and the are special adjectives called articles.

Indefinite Articles (A and An) -- Refers to any noun from a group of nouns.

·         Used before singular nouns that are unspecified :: a pencil, an orange
·         Used before number collectives and some numbers :: a dozen, a gallon
·         Used before a singular noun followed by a restrictive modifier :: a girl who was wearing a yellow hat
·         Used with nouns to form adverbial phrases of quantity, amount, or degree :: I felt a bit moved with all this

An - used before singular count nouns beginning with a vowel (a, e, i, o, u) or vowel sound :: an apple,  an issue, an office, an hour

A - used before singular count nouns beginning with consonants (except a, e, i, o, u) :: a stamp, a desk, a printer, a document

Definite Article (The) -- Refers directly to a specific noun or groups on nouns. It is used to:

·      Indicate a noun that is definite or has been previously specified in the context :: Please share the information
·      Indicate a noun that is unique :: The India Gate is nearby
·      Designate a natural phenomenon :: The nights get shorter during summer
·      Refer to a time period :: This song was very popular in the 1980s
Indicate all the members of a family :: The Smiths have been invited for dinner


Wednesday, September 30, 2015

Daily Quote | Inspirational Thought | Quote of the Day

Develop success from failures. Discouragement and failure are two of the surest stepping stones to success.
                                                                                    -- Dale Carnegie


Monday, September 21, 2015

General Knowledge Quiz

1. How many furlongs is one mile?
[Category: Railway Exams GK]

2. Who was the first President of United States of America?
[Category: LIC Exams GK]
[A]George Washington
[B]James Monroe
[C]Thomas Jefferson
[D]John Adams

3. Who among the following was born on 15th August, 1769?
[Category: MPSSB Exams GK]
[A]Winston Churchill
[B]Queen Victoria
[C]Napoleon Bonaparte
[D]George V

4. Who is the author of "A Streetcar Named Desire"?
[Category: MPEB Exams GK]
[A]Ian Fleming
[B]Jhumpa Lahiri
[C]Salman Rushdie
[D]Tennessee Williams

5. Which of the following countries is landlocked?
[Category: CAT Exams GK]


Indian Polity Questions Answers Quiz

1. Who was the first Lok Ayukt of Uttar Pradesh?
[A]Vishambar Dayal
[B]Vijaylaxmi Pandit
[C]Kailashnath Goyal
[D]Dwarika Prasad Mishra

2. Which one of the following amendment Acts added Bodo, Dogri, Maithili and Santhali Languages in the Eight Schedule to the Constitution?
[A]92nd Amendment Act, 2003
[B]91st Amendment Act, 2003
[C]97th Amendment Act, 2003
[D]100th Amendment Act, 2003

3. The power of the judiciary to entertain petitions for Public Interest Litigation can be traced to ___________________.
[A]Rule of law
[B]Writ jurisdiction
[C]Procedure established by law
[D]Due process of law

4. The President can make laws through ordinances ___________________________________.
[A]Under no circumstances
[B]During the recess of parliament
[C]Only on subjects contaied in the concurrent list
[D]On certain subjects even when Parliament is in session

5. Who is the ‘ex-officio Chairman’ of the Zonal Councils?
[A]Vice President of India
[B]President of India
[C]Union Home Minister
[D]Prime Minister of India


General Science Quiz for Exams

1. A piece of stone and/or iron traveling through space that moves through the earth's atmosphere is?

2. During the chemical process of hydrolysis what is reversed?
[A]Dehydration synthesis
[B]Cellular respiration

3. Mosses and ferns produce fertilized eggs that form ______. These are simplified seeds that have a limited food supply and no seed coat.

4. Which of the following helps keep body cool?

5. What is the life process used by cells to produce energy for cellular activities called?
[B]Dehydration synthesis
[C]Cellular Respiration
[D]Cellular energetics


Friday, August 14, 2015

Happy Independence Day




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