What is CRR and SLR?
CRR, or Cash Reserve Ratio, is the percentage of a bank's total deposits that must be maintained as cash with the central bank (like the RBI). SLR, or Statutory Liquidity Ratio, is the percentage of deposits a bank must hold with itself in the form of liquid assets like cash, gold, or government securities. Both are monetary tools used by the central bank to control the money supply, manage liquidity, and ensure the stability of the banking system.What is a CRR meaning?
The Cash Reserve Ratio (CRR) is a monetary policy tool used by the Reserve Bank of India (RBI) to control liquidity and inflation in the economy. It refers to the percentage of a commercial bank's total deposits that must be maintained as liquid cash with the RBI.Is SLR lower than CRR?
CRR (Cash Reserve Ratio) is greater than SLR in terms of the percentage of NDTL that banks are required to maintain as reserves with the central bank.Do banks earn interest on CRR or SLR?
RBI does not pay any interest on CRR balances held by banks. Higher CRR reduces the funds available for banks to lend, causing interest rates to rise. Statutory Liquidity Ratio (SLR) differs as banks earn interest on SLR investments. CRR and SLR help RBI manage liquidity and maintain bank solvency.What is a good SLR ratio?
Large US banks must hold 3%. Top-tier bank holding companies must also hold an extra 2% buffer, for a total of 5%. The SLR, which does not distinguish between assets based on risk, is conceived as a backstop to risk-weighted capital requirements.Reserve Currencies: Why are they important for an economy?
How is CRR different from SLR?
CRR is a reserve maintained by banks with the RBI. It is a percentage of the banks' deposits maintained in cash form. SLR is an obligatory reserve that commercial banks must maintain themselves. It is a percentage of commercial banks' net demand and time liabilities, maintained as approved securities.Is a high CRR good or bad?
A high CRR is generally good, as it means that a large percentage of your customers are referring your product to others. However, it's also important to consider the average value of a referral.What is SLR now?
Currently, the statutory liquidity ratio rate is 18% (As of February, 2022). RBI has kept 40% as the maximum limit for SLR. SLR is calculated as a percentage of all the deposits held by the bank. Another way to define the SLR meaning is the ratio of a bank's liquid assets to its net demand and time liabilities.What is SLR in simple words?
Statutory Liquidity Ratio -DefinitionIt is basically the reserve requirement that banks are expected to keep before offering credit to customers. The SLR is fixed by the RBI and is a form of control over the credit growth in India. The government uses the SLR to regulate inflation and fuel growth.
How to calculate crr and SLR with example?
CRR Calculation: The CRR is a specific percentage of a commercial bank's total deposits, as decided by the central bank. For instance, if the CRR rate is 4% and a bank has a total deposit of INR 1,00,000, it will have to set aside INR 4,000 (4% of INR 1,00,000) as reserves.What is the minimum SLR for banks?
The liabilities that the banks are liable to pay within one month's time, due to completion of maturity period, are also considered as time liabilities. The maximum limit of SLR is 40% and minimum limit of SLR is 0 In India, Reserve Bank of India always determines the percentage of SLR.What is crr in simple words?
Cash Reserve Ratio or CRR is the minimum amount as specified by the Central Bank, to be maintained by the Commercial banks of the public deposits with the Central Bank.Which banks are not required to maintain CRR?
Cash Reserve Ratio (CRR) is the amount of funds that all Scheduled Commercial Banks (SCB) excluding Regional Rural Banks (RRB) are required to maintain without any floor or ceiling rate with RBI with reference to their total net Demand and Time Liabilities (DTL) to ensure the liquidity and solvency of Banks (Section 42 ...What is the SLR ratio for 2025?
As of May 2025, the SLR in India stands at 18% - meaning every bank must maintain 18% NDTL (Net Demand and Time Liabilities) in liquid form.What will happen if CRR increases?
As per RBI regulations, a portion of a bank's total deposit has to be maintained with the RBI as reserves in the form of liquid cash. This portion is decided by the CRR. The higher the CRR, the lower the amount available for lending in the market.What is the average CRR?
The average customer retention rate across the 10 industries we reviewed is 75%, but varies by industry from 55% to 84%. Customer retention rate (CRR) is your customer count at the end of a specific period minus the new customers you gained over that period, divided by your starting customer count for the same period.Can CRR and SLR be zero?
CRR manages immediate liquidity, while SLR ensures sustainable solvency and credit flow. Can the CRR be zero? The Cash Reserve Ratio (CRR) might theoretically be zero; however, this is extremely rare in practice. Central banks require CRR to maintain liquidity and control inflation.What are the advantages of CRR?
When every bank maintains the necessary CRR, the overall liquidity will be administered and managed thoroughly. This, in turn, will benefit each bank also. A bank will always have the right amount of cash and not fall short of funds when depositors or customer require funds for their various personal needs.Is SLR mandatory for all banks?
Currently, the SLR requirement applies to banking organizations that are designated as Category I, II, or III banking organizations under the tailoring framework put in place in 2019 or otherwise are subject to the advanced approaches provisions of the risk-based capital requirements.What is the most conservative liquidity ratio?
Cash RatioIt considers only cash and short-term investments, making it the most conservative liquidity measure. This ratio helps analysts measure liquidity in "worst-case" scenarios when a company must quickly pay off short-term debt.