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    Meaning of Cash Reserve Ratio and Statutory Liquidity....

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    Radhey Jangid
    This document summarizes trends in the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) in India from 2008 to 2012. It explains that CRR is the amount of cash banks must keep with the Reserve Bank of India to ensure solvency, while SLR determines the amount of liquid assets banks must hold. Over the past 5 years, CRR has decreased from 7.75% to 4.75%, while SLR has decreased slightly from 24% to 23%. Increasing CRR reduces money availability and can increase interest rates, while decreasing SLR allows banks to lend more and potentially lower interest rates charged on loans. Both ratios are tools used by the RBI to control inflation and ensure

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    Meaning of Cash Reserve Ratio and Statutory Liquidity....

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    Radhey Jangid
    263 views7 pages
    This document summarizes trends in the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) in India from 2008 to 2012. It explains that CRR is the amount of cash banks must keep with the Reserve Bank of India to ensure solvency, while SLR determines the amount of liquid assets banks must hold. Over the past 5 years, CRR has decreased from 7.75% to 4.75%, while SLR has decreased slightly from 24% to 23%. Increasing CRR reduces money availability and can increase interest rates, while decreasing SLR allows banks to lend more and potentially lower interest rates charged on loans. Both ratios are tools used by the RBI to control inflation and ensure

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    CRR and SLR

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    This document summarizes trends in the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) in India from 2008 to 2012. It explains that CRR is the amount of cash banks must keep with the Reserve Bank of India to ensure solvency, while SLR determines the amount of liquid assets banks must hold. Over the past 5 years, CRR has decreased from 7.75% to 4.75%, while SLR has decreased slightly from 24% to 23%. Increasing CRR reduces money availability and can increase interest rates, while decreasing SLR allows banks to lend more and potentially lower interest rates charged on loans. Both ratios are tools used by the RBI to control inflation and ensure

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    263 views7 pages

    Meaning of Cash Reserve Ratio and Statutory Liquidity....

    Uploaded by

    Radhey Jangid
    This document summarizes trends in the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) in India from 2008 to 2012. It explains that CRR is the amount of cash banks must keep with the Reserve Bank of India to ensure solvency, while SLR determines the amount of liquid assets banks must hold. Over the past 5 years, CRR has decreased from 7.75% to 4.75%, while SLR has decreased slightly from 24% to 23%. Increasing CRR reduces money availability and can increase interest rates, while decreasing SLR allows banks to lend more and potentially lower interest rates charged on loans. Both ratios are tools used by the RBI to control inflation and ensure

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    GOOD AFTERNOON

    TREND OF CRR & SLR

    Meaning of Cash Reserve Ratio and Statutory Liquidity Ratio


    CRR-Cash reserve Ratio is the amount of Cash(liquid cash like gold)

    that the banks have to keep with RBI. This Ratio is basically to secure solvency of the bank and to drain out the excessive money from the banks.
    SLR- Statutory Liquidity Ratio is determined and maintained by the

    Reserve Bank of India in order to control the expansion of bank credit.

    SLR in India of last five year: Year 2008: 24.00% Year 2009: 25.00% Year 2010: 24.00% Year 2011: 24.00% Year 2012: currently SLR is 23.00% CRR in India of last fiveYear: Year 2008: 7.75% 5.5 Year 2009: 5.00% Year 2010: 5.50% - 6.00 Year 2011: 6.00% Year 2012:currently CRR is 4.75%

    What happens if RBI increases CRR?


    The money availability at banks will be decreased. Interest rates will be increased. Availability of money can be difficult Depositor can get benefit out of the situation as rate of interest is increased.

    Why does RBI use Cash Reserve Ratio (CRR)?


    For the stability of Economy

    To curb Inflation

    Objectives of SLR:
    Statutory Liquidity Ratio is maintained in order to control the expansion of Bank Credit. By changing the level of Statutory Liquidity Ratio, Reserve bank of India can increase or decrease bank credit expansion. Statutory Liquidity Ratio in a way ensures the solvency of commercial banks. By determining Statutory Liquidity Ratio, Reserve Bank of India, in a way, compels the commercial banks to invest in government securities like government bonds.

    What happens if SLR is decreased?


    Earlier SLR was 24%, but on last day of July, RBI changed it to 23%. That means, if earlier SBI had total Rs.100 Deposited in all its 11,000+ branches, then SBI would have to park Rs.24 in G-sec but with new RBI rule, SBI will have to park only Rs.23. Meaning SBI can take away Rs.1 from its G-sec investment and use it for giving as loan to regular customers. So, SBI will sell G-sec worth Rs.1 from its suitcase and use that 1 Rupee for lending as House, Car, Business loans to the customers. SBI has one more rupee to lend to the customers, it'll reduce the interest rate (to seduce more customers). Thus Interest Rates go down when SLR is decreased. In real life, 1% decrease in SLR, means SBI alone will have additional Rs.10,000 crores for lending And all the banks (SBI, ICICI, Bank of Baroda etc combined), will have more than 68,000 crores for lending. Now the reverse: If SLR is increased, then banks have less money to lend = they'll charge more interest rates on loans to keep the profit margin same.

    THAKH YOU

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