Direct Instruments

Cash Reserve Ratio (CRR): The share of net demand and time liabilities that banks must maintain as cash balance with the Reserve Bank.

Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities that banks must maintain in safe and liquid assets, such as government securities, cash and gold.

Refinance facilities: Sector-specific refinance facilities (e.g., against lending to export sector) provided to banks.

Indirect instruments

Liquidity Adjustment Facility (LAF): Consists of daily infusion or absorption of liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo (liquidity absorption) auction operations, using government securities as collateral.

Open Market Operations (OMO): Outright sales/purchases of government securities, in addition to LAF, as a tool to determine the level of liquidity over the medium term.

Market Stabilisation Scheme (MSS): This instrument for monetary management was introduced in 2004. Liquidity of a more enduring nature arising from large capital flows is absorbed through sale of short-dated government securities and treasury bills.

The mobilised cash is held in a separate government account with the Reserve Bank 

Repo/reverse repo rate: These rates under the Liquidity Adjustment Facility (LAF) determine the corridor for short-term money market interest rates. In turn, this is expected to trigger movement in other segments of the financial market and the real

economy.

Bank rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers. It also signals the medium-term stance of monetary policy.

Key financial terms

APR: It stands for Annual Percentage Rate. APR is a percentage that is calculated on the basis of the amount financed, the finance charges, and the term of the loan.

ABS: Asset-Backed Securities. It means a type of security that is backed by a pool of bank loans, leases, and other assets.

EPS: Earnings Per Share means the amount of annual earnings available to common stockholders as stated on a per share basis.

CHAPS: Clearing House Automated Payment System. It’s a type of electronic bank to- bank payment system that guarantees same-day payment.

IPO: Initial Public Offerings is defined as the event where the company sells its shares to the public for the first time. (or the first sale of stock by a private company to the public.)