SLR is used to control inflation and propel growth.

Through SLR rate tuning the money supplyin the system can be controlled

efficiently.Bank rate, also referred to as the discount rate, is therate of interest which acentral bank chargeson the loans and advances that it

extends tocommercial banksand other financial intermediaries.Ch anges in the bank rate are often used by central banks to control

the money supply. Capital Adequacy Ratio - CAR A measure of a bank's capital. It is expressed as a percentage of a

bank's risk weighted creditexposures. Also known as "Capital to Risk Weighted Assets Ratio (CRAR)."Investo pedia explains

Capital Adequacy Ratio - CAR This ratio is used to protect depositors and promote the stability and efficiency of financialsystems

around the world.Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease

trading, and tier two capital, which can absorb losses in the event of awinding-up and so provides a lesser degree of

protection to depositors. Prime Rate or Prime Lending Rates (PLR) Prime rate or Prime lending rates (PLR) refer to interest rates

charged by commercial banks for their most credit-worthy customers . Generally credit-worthy

customers consist of largecorporation s .The rate is a key interest rate, since loans to less-creditworthy customers are

often tied to a highinterest rate. For example, a Company A (most creditworthy customer) may borrow at a prime rate of 5%, but a less-

well-established Company B may borrow from the same bank at prime plus 1, or 6%.Banks good standing customers have little chance of

defaulting than customer who has a higher risk of defaulting, so the bank can charge them a rate that is lower than the rate that would

becharged to other customers. Non-performing Asset Aloan or lease th at is notmeeting its stated principal a nd

interest payment s.Banksusuallycla ssify as nonperforming assets anycommercial loanswhich are more than 90days overduea

ndany consumer loanswhich are more than 180 days overdue. More generally, anassetwhich isnot producingincome .

Asset-liability management

Arisk management tech niquedesigned to earn an adequa te returnwhile maintaining acomfortablesurp

lusof assetsbeyon dliabilities. Takes intoconsideration interest rates, earning po wer , and degree of willingness totake ondebt.als

o called surplus management. Repo Rate Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is

therate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks toget money at a cheaper rate. When the repo

rate increases borrowi ng from RBI becomes moreexpensive. Reverse Repo rate Reverse Repo rate is the rate

at which Reserve Bank of India (RBI) borrows money from banks.Banks are always happy to lend money to RBI since their

money are in safe hands with a goodinterest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI dueto this

attractive interest rates. It can cause the money to be drawn out of the banking system.Due to this fine tuning of RBI using its tools of CRR,

Bank Rate, Repo Rate and Reverse Reporate our banks adjust their lending or investment rates for common man. What is Inflation?

Inflation is defined as an increase in the price of bunch of Goods and services that projects theIndian economy. An

increase in inflation figures occurs when there is an increase in the averagelevel of prices in Goods and services. Inflation

happens when there are less Goods and more buyers, this will result in increase in the price of Goods, since there is more demand and

lesssupply of the goods.Ineconomi cs,the inflation rate is a measure of inflation, the rate of increase of a price index (for example,

aconsumer price index).It is the percentage rate of change in price level over time.
[1]

The rate of decrease in the purchasing power of money

is approximately equal.It's used to calculate thereal interest rate, as well as real increases inwages, and officialmeasurem ents of this rate

act as input variables toCOLAadjustme nts and Inflation derivatives price s.If P
0

is the current average price level and P

1

is the price level a year ago, the rate of inflationduring

the year might be measured as follows:After the year the purchasing power of a unit of money is multiplied by a factor 1 / ( 1 +

inflationrate ).There are other ways of defining the inflation rate, such as log P
0

log P

(using thenaturallog), again stated as a percentage. In this case after the year the purchasing power of a unit of money is

multiplied by a factor e
inflation rate

Foreign exchange reserves

Foreign exchange reserves (also called Forex reserves) in a strict sense are only

the foreigncurrencyd eposits and bonds held bycentral banksand monetary authorities. However, the termin popular

usage commonly includes foreign exchange andgold, SDRs a nd IMFreserve po sitions. This broader figure is more readily available, but it is

more accurately termed officialinternation al reserves or international reserves. These areassets of thecentral bank held

indifferentreserve currencies,mostly the US dollar , and to a lesser extent theeuro, theUK pound,and theJapanese yen, and used to back its liabilities, e.g.

the local currency issued, and thevarious bank reserves deposite dwith the central bank, by the governmentor financialinstituti ons.The

spot exchange rate

refers to the current exchange rate. The forward exchange rate refersto an exchange rate

that is quoted and traded today but for delivery and payment on a specificfuture date. GDP The

gross domestic product

( GDP ) or gross domestic income ( GDI

) is a basic measure of acountry's economic performance and is the market value of all final goods and services

madewithin the borders of a nation in a year . It is a fundamental measurement of production and isvery often positively

correlated with thestandard of living.

[1]

. GDP can be defined in three ways,all of which are conceptually identical. First, it is equal to the

total expenditures for allfinalgoodsand services produced within the country in a stipulated period of time (usually a 365-dayyear ).

Second, it is equal to the sum of thevalue addedat every stage of production (theintermediate stages) by all the industries within

a country, plus taxes less subsidies on products,in the period. Third, it is equal to the sum of the income generated by production in

the countryin the periodthat is,compensation of employees, taxes on production and imports lesssubsi dies, and gross

operating surplus(or profits).

[2 ][3]

The most common approach to measuring and quantifying GDP

is the expenditure method: GDP = private consumption+ gr oss investment + gov ernment spending + ( exportsimports

) , or,GDP = C + I + G + (X M). GDP vs. GNP Gross domestic product ('

GDP'

) is defined as the "value of all final goods and

services produced in a country in 1 year".

[1]

On the other hand, Gross National Product (

GNP

) is defined as the"value of all goods and services produced in a country in one year, plus income earned by itscitizens abroad, minus income

earned by foreigners in the country" .

[2]

The key differencebetween the two is that GDP is the total output of a region, e.g.

France, and GNP is the total output of all nationals of a region, e.g. French. GrossNationalPro duct.

GNP is thetotal valueof all finalgoodsandser vicesproduced within anation in a particular year, pl us incomeearned by

itscitizens(includi ng income of those located abroad), minusincome of non-residents located in thatcountry. Basically, GNP

measures the valueof goods andservices that the country's citizens produced regardless of their location. GNP is onemeasureof the

economic conditi onof a country, under the assumption th at a higher GNP leads to a higher qualityof living, all other things

beingequal.Infina nce,the exchange rates (also known as the foreign-exchange rate , forex rate

or FXrate ) between twocurrenciesspe cifies how much one currency is worth in terms of the other. Itis the value of a

foreign nations currency in terms of the home nations currency.

[1]

For examplean exchange rate of 91 Japanese yen(JPY, ) to the United States

dollar (USD, $) means thatJPY 91 is worth the same as USD 1. Theforeign exchange market is one of the largest marketsin the

world. By some estimates, about 3.2 trillion USD worth of currency changes hands everyday