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Understanding ETFs Uses, Returns and Comparison with Mutual Funds and Stocks

 Exchange-Traded Funds (ETFs) have gained popularity among investors for their unique features and benefits. In this blog, we'll explore the uses of ETFs, their potential returns, how they differ from mutual funds and stock investments, and their safety profile. What is an ETF? An ETF is a type of investment fund that trades on stock exchanges, much like individual stocks. It holds a collection of assets, such as stocks, bonds, or commodities, and aims to track the performance of a specific index, sector, or asset class. Uses of ETFs Diversification : ETFs allow investors to gain exposure to a wide range of assets without having to purchase each individually. For instance, an ETF tracking the S&P 500 gives you exposure to 500 different stocks, reducing the risk associated with individual stock investments. Cost Efficiency : ETFs often have lower expense ratios compared to mutual funds. They typically pass on lower management costs to investors since they are often passively man
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Repo Rate , Reverse Repo Rate, CRR and SLR

Repo Rate

  • Interest Rate at which the central bank i.e. Reserve Bank of India lends money to commercial banks in the event of any shortfall of funds to maintain liquidity. 
  • Used by monetary authorities to control inflation
  • Home loan rates are linked to RBI Repo Rate.
  • Banks use Repo rate to determine deposit rate, lending rates and base rates.

Reverse Repo Rate

  • Rate at which Banks deposit their excess funds with the RBI. 
  • It is lower than Repo rate
  • It is used to control the cash flow in financial market
  • Increase of Reverse Repo Rate leads to more deposit by Bank with RBI to earn more interest and vice versa.


CRR (Cash Reserve Ratio)


  • Legal provisions - section 42(1) RBI Act.
  • Rate - Fixed by RBI
  • Average Fortnightly balance on reporting Friday in a current a/c with RBI.
  • Min.daily balance should not < 90% of the average fortnightly balance
  • Default in maintain CRR- bank has to pay interest to RBI at   
    • bank rate +3% - first day 
    • bank rate +5% - subsequent days
  • No interest paid by RBI.

SLR (Statutory Liquidity Ratio)


  • Legal provisions - Section 24 of BR Act.
  • Rate RBI can fix up to 40% of net demand and time liabilities as on last Friday of preceding fortnight.
  • From of SLR investment .
    • Cash Balance 
    • Balance with bank and excess CRR balance with RBI
    • Investment in Gold.
    • Investment in unencumbered approved securities (govt. security/trustee security including purchase under LAF)
  • Default - Interest payment as in CRR.
  • No min 
  • Max 40%   

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