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Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)

Posted on : 21 Dec 2019

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  • The cash reserve ratio (CRR) is the ratio (fixed by the RBI) of the total deposits of a bank in India which is kept with the RBI in the form of cash.
  • If the CRR is raised, banks will have lesser money to lend. RBI uses CRR to absorb excess liquidity or to release funds needed for economic growth.
  • This was fixed to be in the range of 3 to 15 percent. An earlier Amendment (2007) has removed the 3 percent floor and provided a free hand to the RBI in fixing the CRR.
  • The statutory liquidity ratio (SLR) is the ratio (fixed by the RBI) of the total deposits of a bank which is to be maintained by the bank with itself in non-cash and cash form.

Article Related Questions

  1. How is the Cash Reserve Ratio (CRR) different from the Statutory Liquidity Ratio (SLR)?
    1.Unlike CRR, SLR is the ratio of the total deposits of a bank and is to be fixed by the bank itself.
    2.CRR is kept in both cash and non-cash forms, while SLR is kept only in cash form.
    Which of the above statements is/are incorrect?

  2. 1.1 only

    2.2 only

    3.Both 1 and 2

    4.Neither 1 nor 2

    Right Ans : Both 1 and 2

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