Quick Answer: What Is The Purpose Of SLR?

Does RRB maintain CRR and SLR?

Other banks in India are directly regulated by RBI.

Regional Rural Banks Act, 1976.

Statutory pre-emptions – RRBs need not maintain CRR (Cash Reserve Ratio) & SLR (Statutory liquidity ratio) like any other banks..

What is SLR example?

This minimum percentage is called Statutory Liquidity Ratio. Example: If you deposit Rs. 100/- in bank, CRR being 9% and SLR being 11%, then bank can use 100-9-11= Rs.

Who keeps SLR?

1. ASSETS ELIGIBLE UNDER SLR. The eligible assets for SLR mainly include cash, gold and approved securities by the RBI. Most banks keep the SLR in the form of government approved securities specifically – central government bonds and treasury bills as they give a reasonable return.

What is the purpose of CRR?

While ensuring some liquid money against deposits is the primary purpose of CRR, its secondary purpose is to allow the RBI to control liquidity and rates in the economy. In the short term, interest rates swing up or down depending on how much liquidity is available for lending.

Does RBI pay interest on CRR and SLR?

With the amendment of the RBI Act, from 2007, no interest is paid on CRR balances. As no interest is paid on CRR balances, an element of monetary control has been regained even though the prescription is as low as 4.75 per cent.

How do banks maintain SLR?

SLR is expressed as a percentage of the net demand and time liabilities (NDTL) of a bank reduced by a technically computed netting amount. … SLR has to be maintained in the form of gold, cash or approved securities notified by RBI such as central and state government bonds.

What happens if SLR increases?

Impact of SLR If the SLR increases, it restricts the bank’s lending capacity and helps in controlling the inflation by soaking the liquidity from the market. Consequently, banks will have less money available to lend, and they will charge higher interest rates on loans to keep up with their profit margin.

What is CLR and SLR?

Cash reserve Ratio (CRR) is a percentage of money to be kept by all the banks with Reserve Bank of India in the form of cash and hence it regulates the flow of money in the economy while Statutory liquidity ratio (SLR) is time and demand liabilities of the bank which are to be kept with the bank itself to maintain …

What is the current SLR?

Current Key RatesDateRepo RateSLROct 20195.15%18.75%Aug 20195.4%19.5%June 20195.75%19.5%Apr 20196%19.5%21 more rows•May 21, 2020

What is repo rate 2020?

The current repo rate as on 22 May 2020 is 4.00%, down from 4.40%. Following this rate cut, the RBI has announced a rate slash for reverse repo rate as well. In the latest rate cut, the central bank has reduced the reverse repo rate by 40 basis points which now stands at 3.35%, down from 3.75%.

Which banks maintain CRR and SLR?

The Central Bank controls the liquidity in the Banking system with CRR. In the case of SLR, the securities are kept with the banks themselves, which they need to maintain in the form of liquid assets. In CRR, the cash reserve is maintained by the banks with the Reserve Bank of India.

Who decides CRR and SLR?

SLR, or statutory liquidity ratio, determines the amount of money a bank needs to invest in certain specified securities, which are predominantly securities issued by the central government and state governments. RBI fixes this limit. Unlike CRR, money invested under the SLR window earn some interests for banks.

What happens when CRR and SLR increases?

An increase in SLR rate means that commercial bank shall have to invest more money in Government and other approved securities which deplete lendable source of the banks. … RBI tries to curb the inflation by increasing the CRR, wherein banks have to keep more balance with RBI, thus their lend-able resource depletes.

What mean by SLR?

Statutory liquidity ratioIn India, the Statutory liquidity ratio (SLR) is the Government term for the reserve requirement that commercial banks are required to maintain in the form of 1. cash, 2. gold reserves,3. PSU Bonds and 4. Reserve Bank of India (RBI)- approved securities before providing credit to the customers.

What is difference between CRR and SLR?

CRR is the percentage of money, which a bank has to keep with RBI in the form of cash. On the other hand, SLR is the proportion of liquid assets to time and demand liabilities.

What is the purpose of CRR and SLR?

Basic differences between CRR and SLR.SLR (Statutory Liquidity Ratio)Cash Reserve Ratio (CRR)This ratio is used by the RBI to control the bank’s leverage for credit expansion.CRR is issued by the central bank to control the liquidity in the market.3 more rows•Jul 6, 2019

Does bank earn interest on SLR?

Banks can’t lend that money to corporates or individual borrowers or use it for investment purposes. Banks also don’t earn anything on the money held in that account. … Unlike CRR, money invested under the SLR window earn some interests for banks. But they can’t access this fund for lending purposes.

What is SLR in simple language?

The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). In simple words, it is the percentage of total deposits banks have to invest in government bonds and other approved securities.

What is the difference between bank rate and repo rate?

Bank Rate and REPO rates are almost similar. The central bank(RBI for India) lends money to a private bank for which the private bank needs to pay the interest rate. The only difference is that the REPO rate is used to lend money for the short term while the bank rate for the long term.

Why is SLR needed?

SLR is used to control the bank’s leverage for credit expansion. The Central Bank controls the liquidity in the Banking system with CRR. In the case of SLR, the securities are kept with the banks themselves, which they need to maintain in the form of liquid assets.

What is the current CRR and SLR?

RBI Monetary Policy TodayIndicatorCurrent RateCRR3%SLR18.50%Repo Rate4.00%Reverse Repo Rate3.35%2 more rows