International Journal of Management and Business Studies

Impact of reverse repo rate and cash reserve ratio in National Stock Exchange (NSE) CNX bank index

S. Vanitha¹*, P. Nageswari² and P. Srinivasan³

¹Department of Commerce and Financial Studies, Bharathidasan University, Tiruchirappalli, Tamil Nadu, India.

²Department of Commerce, Bharathidasan University Constituent College, Lalgudi, Tiruchirappalli, Tamil Nadu, India.

³Department of Commerce, Bharathidasan University Constituent Arts and Science College, Inamkulthur, Tiruchirappalli, Tamil Nadu, India.

*Corresponding author. E-mail: [email protected]

Received 03 October, 2012; Accepted 30 January, 2013

Abstract

Monetary policy is the process by which the Central Bank or Monetary authority of a country controls the supply of money, often targeting a rate of interest. Every year Reserve Bank of India changes the cash reserve ratio (CRR), statutory liquidity ratio (SLR), prime lending rates (PLR), Repo Rate etc, to control the money supply of the country. This paper aim to discuss about the impact of reverse repo rate and cash reverse ratio in the share price of banking companies listed in National Stock Exchange. The analysis of the study showed that the security prices reacted to the announcements of reverse repo rate and cash reserve ratio.

Key words: Monetary policy, cash reserve ratio, reverse repo rate, National Stock Exchange.