Nationalization of Banks:
- 14 Banks were nationalized on 19 July 1969 and later six banks were nationalized in 1980
| 14 banks with deposits above Rs.50 crores were Nationalized – 19 July 1969 | |
| 1. Allahabad Bank | 8. Indian Overseas Bank |
| 2. Bank of Baroda | 9. Punjab National Bank |
| 3. Bank of Maharashtra | 10. Syndicate Bank |
| 4. Canara Bank | 11. Union Bank |
| 5. Central Bank of India | 12. United Bank of India |
| 6. Dena Bank | 13. UCO Bank |
| 7. Indian Bank | 14. Bank of India |
| 6 Banks with deposits above Rs.200 crores were Nationalized – 15 April 1980 | |
| 1. Andhra Bank | 4. Oriental Bank of Commerce |
| 2. Corporation Bank | 5. Punjab & Sind Bank |
| 3. New Bank of India | 6. Vijaya Bank |
| Repo Rate : (RR) | Reverse Repo Rate : (RRR) |
| · The rate at which the RBI is willing to lend to commercial banks is called Repo Rate. · Whenever banks have any shortage of funds they can borrow from the RBI, against securities. If the RBI increases the Repo Rate, it makes borrowing expensive for banks and vice Versa. · As a tool to control inflation, RBI increases the Repo Rate, making it more expensive for the banks to borrow from the RBI, · Similarly, the RBI will do the exact opposite in a deflationary environment. | · The rate at which the RBI is willing to borrow from the commercial banks is called reverse repo rate. · If the RBI increases the reverse repo rate. It means that the RBI is willing to offer lucrative interest rates to banks to park their money with the RBI. · This results in a decrease in the amount of money available for bank customers as banks prefer to park their money with the RBI as it involves higher safety. · This naturally leads to a higher rate of interest which the banks will demand from their customers for lending money to them. |
Money Supply:
- In India, Currency notes are issued by the Reserve Bank of India (RBI) and coins are issued by the Ministry of Finance, Government of India (GOI)
- M0 = Reserve Money – Currency in Circulation + Banks deposits with RBI + Other deposits with RBI
- M1 = Currency held with the public + cash Reserves in commercial and Co-operative banks + cash reserves in the RBI.
- M2 = M1 + Money saved in Post Office and bank savings Accounts.
- M3 = M1 + Time Deposits in Commercial and co-operative banks.
- M4 = M3 + Post office savings Money
- M1 and M2 are known as narrow money
- M3 and M4 are known as broad money
- Cash Reserve Ratio (CRR): it is the fraction of the deposits the bank must keep with RBI.
- Statutory Liquidity Ratio (SLR): it is the fraction of the total demand and time deposits of the commercial banks in the form of specified liquid assets.