CHANGES IN CRR AND SLR IN RECENT PAST AND THEIR

IMPACT

MEMBERS IN GROUP:-

Jitesh Sethi -127 Amit -128 Avinash Kapil -129 Bhavya Malhotra -130 Pinki Rana -131 Sakshi Jaiswal -132 Nitish Yadav -133 Durgesh Kumar -201 Seenu Bansal-202 Neha Sharma -203

Cash Reserve Ratio

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

ADVANTAGES OF MAINTAINING CRR:-

1) To ensure liquidity and solvency position of scheduled commercial banks .2) To monitor and regulate the flow of credit given by commercial banks. 3) To ensure a stable flow of credit in the economy. 4) When RBI increases CRR the SCB restrict the flow of credit to the public which sucks the money from the general public .5) When RBI decreases CRR the SCB grant more credit loans and other facilities to the general public which increase the flow of money in the hands of many.

DRAWBACKS OF MAINTAINING CRR :-

1) Affects industrial growth ,when commercil banks have to maintain high rate of crr with rbi the restrict the credit to general public who are none other that business developers ,entrepreneurs and other industrialists who seek pre and post shipment finance. 2) Reduces the standard of living of people when crr is increased.3)Banks loose their valuable customers when they are in a situation not to provide credit to general public.

CHANGES IN CRR:-

Cash Reserve Ratio (CRR)

4.00% (wef   09/02/2013) -announced on 29/01/2013

Decreased from 4.25%which was continuing since 30/10/2012

ADVANTAGES OF MAINTAINING SLR

The SLR is commonly used to contain inflation and fuel growth, by increasing or decreasing it respectively

• This counter acts by decreasing or increasing the money supply in the system respectively.

• To control the expansion of bank credit- By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion.

CHANGES IN SLR:-

Statutory Liquidity Ratio (SLR)

23%(w.e.f. 11/08/2012) (announced on 31/07/2012)

Decreased from 24% which was continuing since 18/12/2010 

IMPACT OF CRR:-

IMPACT OF CRR:-

CRR Hike Help In Lowering Inflation Impact on Interest rates Reduces credit expansion

IMPACT OF SLR:-

Increase credit availability SLR, A CUSHION FOR SAFETY

CRR VS. SLR:-

CRR SLR•CRR, is the portion of deposits that the banks have to maintain with the Central Bank to reduce liquidity in banking system.

SLR restricts the bank’s leverage in pumping more money into the economy

CRR controls liquidity in banking system

SLR regulates credit growth in the country

CRR it has to be only cash To meet SLR, banks can use cash, gold or approved securities

CRR is maintained in cash form with central bank

SLR is money deposited in govt. securities