Hypothecation

1. Pledge- the possession of the securities is with the lender..movable securities...eg gold loan...the lender can sell the gold to take back incse the borrower defaults.

2. Hypothecation - movable property eg car

3. Mortgage-immovable property eg building or anything attached to the ground but not grass or trees as they can be cut.

4. Lien- similar to pledge, but the lender can only retain the security and cannot sell it unless explicitly stated in the lien contract

5. Bank Rate- Rate at which RBI gives money to commericial banks

6. CRR(4%)-Banks in India are required to hold a certain proportion of their deposits in the form of cash. RBI uses CRR either to drain excess liquidity or to release funds needed for the growth of the economy from time to time. Increase in CRR means that banks have less funds available and money is sucked out of circulation. Thus we can say that this serves dual purposes i.e.(a) ensures that a portion of bank deposits is kept with RBI and is totally risk-free, (b) enables RBI to control liquidity in the system, and thereby, inflation by tying the hands of the banks in lending money.

7. SLR(19.5 %)- Apart from CRR, banks have to invest certain percentage of their deposits in specified financial securities like Central Government or State Government securities. Unlike CRR, banks earn some amount on it..

8. Net demand and time liabilities- all the liabilities of the bank are supposed to be categories into demand or time liabilites. Demand liabilities include all liabilities payable on demand.

9. Repo Rate(6%)-Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks against securities

10. Reverse Repo Rate(5.75%)- Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI.

Thus, we can conclude that Repo Rate signifies the rate at which liquidity is injected in the banking system by RBI, whereas Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks

11. Marginal Standing Facility rate(MSF) 6.75% - funds overnight

Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.

To provide additional short term funds to banks. Similar to repo, but difference is that when the banks exhaust all other ways of borrowing money, then they adopt MSF.

12. Base Rate: Base rate is the minimum rate at which the banks can lend.

13. Prime Lending rate:

Earlier we had (Prime lending rate / Prime rate)

The