An interest rate ceiling is the maximum interest rate permitted in a particular transaction.
Floor rate and ceiling rate of crr.
An interest rate floor is an agreed upon rate in the lower range of rates associated with a floating rate loan product.
An interest rate floor reduces the risk to the bank or other party receiving the interest.
It is the opposite of an interest rate floor.
However the rbi amendment act 2006 provides for removal of the floor and ceiling with respect to setting the crr and authorizes the rbi to set the ratio in keeping with the broad objective of maintaining monetary stability in the economy.
Presently banks are not paid any interest on behalf of the rbi for parking the required cash.
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Mumbai june 23 uni the reserve bank of india rbi can now prescribe cash reserve ratio crr to scheduled banks without any floor rate or ceiling rate as per the needs of securing monetary.
Interest rate floors are utilized in derivative.
For example an adjustable rate mortgage may have an interest rate floor stating that the rate will not go below 3 5 even if the formula used to calculate the interest rate would have it do so.
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