CRR And SLR With Respect To Banks
Updated on March 1, 2023
‘CRR’ or ‘Cash Reserve Ratio’ is defined as the minimum level of cash reserve which banks are required to maintain at all times. This is a mandatory reserve requirement for ensuring that banks can meet all their payment obligations on time and do not default.
1. A particular proportion or percentage of a bank’s total deposit will be maintained in a current account with the RBI.
2. This will be a statutory deposit and the said bank will not be able to access funds from this account for banking operations or for any other purpose.
3. Banks will not earn any interest on this money held as a reserve in this account.
‘SLR’ or ‘Statutory Liquidity Ratio’ is defined as the amount of money a bank needs to invest in specified central government and/or state government securities.
1. RBI defines this limit for banks.
2. Money invested in these securities under SLR will earn interest for banks. 3. Funds deposited under SLR by banks cannot be accessed or used for lending purposes.