CRR is a reserve maintained by banks with the RBI. It is a percentage of the banks’ deposits maintained in cash form. SLR is an obligatory reserve that commercial banks must maintain themselves. It is a percentage of commercial banks’ net demand and time liabilities, maintained as approved securities. These are defined liquid securities. Repurchase agreements, or repos, are a form of short-term borrowing used in the money markets, which involve the purchase of securities with the agreement to sell them back at a specific date, usually for a higher price.
Repos and reverse repos represent the same transaction but are titled differently depending on which side of the transaction you’re on. For the party originally selling the security (and agreeing to repurchase it in the future), it is a reverse repurchase agreement (RRP). For the party originally buying the security (and agreeing to sell in the future) it is a repurchase agreement (RP) or repo agreement. These are the monetary measures used by the Reserve Bank of India to deal with the deficiency of funds and liquidity in the market. It is a vital money flow control mechanisms used by the central bank. Bank lending rates are impacted by repo rate and reverse repo rate.
