What do you understand by Cash Reserve Ratio (CRR) and Statutory Liqui

Question

What do you understand by Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)? How does a change in these ratios affect the availability of bank credit to business organisations? Discuss.

29 Jul 2023

Answer :

Word Count : 606

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are two important monetary policy tools used by central banks, such as the Reserve Bank of India (RBI), to regulate and control the liquidity and credit availability in the banking system.

Cash Reserve Ratio (CRR): CRR refers to the portion of a bank's total deposits that it is required to keep with the central bank in the form of cash reserves. It is a percentage of the bank's total demand and time liabilities. By adjusting the CRR, the central bank can influence the amount of funds available for lending by the banks. When the central bank raises the CRR, banks are required to keep a higher portion of their deposits as reserves, _______ _________ ______ ____ ____.
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