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Did You Know: What is Double Financial Repression? | RBI Grade B 2021

Double Financial Repression

“RBI Grade B 2021 exam preparation”, this is what should be your focus now rather than “RBI Grade B 2021 notification”. All you can do is prepare regularly as once the notification is out there is not enough time left to cover the entire syllabus. ixamBee is back with its next blog What is Double Financial Repression? 

What is Double Financial Repression?

In simple terms, financial repression means that savers are not adequately compensated for their savings.

Double financial repression was pointed out in Economic Survey of FY15 by economist Arvind Subramanian. It referred to a phenomenon where the Indian banks suffered financial repression both on the assets and liabilities side.

Double financial repression is dangerous as it lowers the returns for the banks, thereby lowering the returns for the ultimate depositors (i.e. the public who provide their savings to the banking system).

In the current scenario, the financial repression on liabilities side is lower (as inflation is largely in check) while that on the assets side is more which has been further worsening due to the NPA mess of the banking system. As such, lowering of the SLR requirement can be one of the welcome policy measures to address the financial repression on the assets side, to some extent.

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About the Author Prachi Agarwal:

Prachi Agarwal is an MBA (Finance) from BIMTECH, Noida and B. Com (Hons) from Hansraj College, Delhi University. She has previously worked with CARE Ratings. At ixamBee, she is faculty for Financial and Management and Securities Market Awareness. Her expertise topics are Ratio analysis, risk management, bond valuation, etc. She is the student’s favorite faculty for her easy to understand approach while teaching in Live Classes.

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