Significant of Crr and Slr.

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SHANKAR NARAYAN COLLEGE OF ARTS,COMMERCE AND SCIENCE

THIRD YEAR BANKING ANDINSURANCE

[T.Y.B.B.I]

PROFESSOR NAME :- CA. NAVIN SARAF

SUBJECT:-FINANCIAL REPORTING AND

ANALYSIS.


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TOPIC

SIGNIFICA

NT OF :-

*CASH

NAME:- ROLL NO:-

DEVESH VERMA 41

AARTI YADAV 42

PINTU YADAV 43

POONAM YADAV 44

SUNIL YADAV 45


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RESERVE BANK OF INDIAAs you are aware, the Reserve

Bank of India has from time to time,issued a number of circularscontaining instructions to banks onmatters relating to maintenance of

Cash Reserve Ratio (CRR) andStatutory Liquidity Ratio (SLR). Inorder to enable the banks to have all

the extant operating instructions onthe sub ect at one lace this Master

INTRODUCTION


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CASH RESERVE RATIO(CRR) :-

CRR Stands for Cash Reserve Ratio.

CRR fluctuate between 3% to 20% imposedby RBI.A CRR is the % of bank Reserve to Depositand Notes under section 42 (1) of theReserve Bank of India Act, 1934. CRR is theamount of Funds that the banks have to keepwith RBI.If RBI decides to increase the % of this, theavailable amount with the banks comesdown.RBI increases CRR rate to pull out the

excessive money from the banks.It is also Known as Cash Asset Ratio orLiquidity Ratio.CRR is used as tool in Monetary Policy, whichinfluence Countrys Economy, Borrowing and

Interest Rates across the country.


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OBJECTIVE OF C.R.R

v CRR :-

1. RBI uses CRR either to drain excessliquidity or to release funds needed forthe economy from time to time.

2. Increase in CRR means that bankshave less funds available and moneyis sucked out of circulation.

3. A portion of bank deposits is totallyrisk-free, but also enables RBI tocontrol liquidity in the system.


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CRR and liquidity(e.g):-

For e.g. say:-the CRR is declared by RBI at10%. if a bank receives Rs. 100 as deposit,then they can lend Rs. 90 as a loan and willhave to keep the balance Rs. 10 in customersdeposit account with RBI.

Now, the borrower who has received Rs. 90 as

a loan will deposit the same in his bank.

The borrower's bank will now lend out Rs. 81(Rs.90 X 90%) and keep Rs. 9 in his depositaccount

As this process continues, the banking systemcan expand the initial deposit of Rs.100 into amaximum of Rs. 1000(Rs. 100 + Rs. 90 + Rs.81.=Rs. 1000)


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STUDENT NAME:- CHARACTER PLAY BYTHEM:-

SUNIL YADAV RESERVE BANK OFINDIA.

AARTI YADAV BANKER

PINTU YADAY CUSTUMER

DEVESH VERMA BORROWER(LOAN)

POONAM YADAV CUSTOMER


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So :-

The higher the cash reserve (CRR)

required, the lower the money availablefor lending

Every time the borrowed money comesinto a deposit account of a customer,the bank has to compulsorily keep apart of it as reserves

This reduces credit expansion by

controlling the amount of money thatgoes out by way of loans

This directly affects money creationprocess and in turn affects theeconomic activity


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1. CRR & SLR is used as a tool inmonetary policy, Influencing thecountry's economy, borrowing andinterest rates.

1. CRR works like brakes on the

economy's money supply.

1. CRR requirements affect thepotential of the banking system tocreate higher or lower money

supply.

1. Let us now understand how CRRrequirement affects the potential ofbanks to create higher or lowermoney supply.

STATUTORY LIQUIDITY RATIO(SLR) :-

SLR stands for Statutory Liquidity Reserve/Ratio

Statutory Liquidity Reserve/Ratio(SLR) ispercentage of deposits under Section 24 of the BankingRegulation Act, 1949. The bank has to maintain in formof

gold,cash orother approved securities.It regulates the credit growth in India

Every financial institute is required to maintain aStatutory Liquidity reserve (SLR) of 24% to 40% ontotal demand and time liabilities.


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OBJECTIVE OF S.L.R

v SLR:-

1. Every bank is required to maintainat the close of business every day, aminimum proportion of their Net

Demand and Time Liabilities asliquid assets in the form of cash,gold and approved securities.

2. An increase in SLR also restricts the

banks leverage position to pumpmore money into the economy.

1. we can say that it is ratio of cashand some other approved to

liabilities (deposits) It regulates the


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Effects on money supply by CRR& SLR:-

1. CRR & SLR is used as a tool in monetarypolicy, Influencing the country's economy,borrowing and interest rates.

1. CRR works like brakes on the economy'smoney supply.

1. CRR requirements affect the potential of thebanking system to create higher or lowermoney supply.


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& SLRCRR SLR

MEANING:-

CRR is a cashreserve ratio

which every bankhave to maintaininto cash as

deposit with RBI.

SLR is astatutory liquidity

ratio, which everybank have tomaintain in form

of :-a) CASH, OR

b) GOLD, OR

c) APPROVED


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HISTORY:-

CRR was introduced

in 1950.

OBJECTIVE:-

To control theinflation & money supplyof country.

SLR was introduced

in 1967.

a) To restrict theexpansion of bankcredit.

b) To augment the

investment of thebanks inGovernmentsecurities.

c) To ensure solvency


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RESERVERATIO:-

As per 42(1) of RBIact ,1934. CRR ismaintained between 3%to 20%.

MAINTAINANCE:-

CRR should maintainafter every 14 days with

RBI

As per under Section24 of the Banking

Regulation Act, 1949.

SLR is maintained

between 24% to 40%.

SLR should maintain

at the end of every day.


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1

2

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6

7

8

9

10

PERCENTAGE


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0

1

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6

7

8

9

10


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THANK YOU


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Hope you have now

understood the conceptof :-

Cash Reserve Ratio andstatutory liquidity ratio.


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Any

question.?


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THANK YOU

Significant of Crr and Slr.

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