General Knowledge - Indian Economy - Discussion

Mr. Ahmed thanks for your explination. But I not exactly got the concept of SLR, can you please explain in a easy way.

CRR means, Banks has to keep a certain percentage (currrently 6%) of their total deposits with RBI. If CRR decreases Banks may have more liquidity so they can give more credit and hence the credit will be created.

CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their deposits in the form of cash. However, actually Banks don't hold these as cash with themselves, but deposit such case with Reserve Bank of India (RBI) / currency chests, which is considered as equivlanet to holding cash with RBI While SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. Thus, we can say that it is ratio of cash and some other approved securities to liabilities (deposits) It regulates the credit growth in India.

CRR rate is 6.00%(w.e.f.24-4-2010)
SLR is 24.00% (w.e.f. 18-12-2010)

Thanks vikash.

Nice explanation. By Harsha. Thank you.

What is the difference between CRR and SLR ?

Because as RBI lowers CRR bank will get more money to spend and they can keep less money as reserved cash with RBI. So credit creation increaes.

Every bank is obliged to keep a certain proportion of its total deposits with the RBI. This ratio is termed as CRR which is decided by the RBI itself. So if it lowers the CRR then the amount of money left with the banks will increase and thus the banks will be able to increase its lending operations thus. The amont of credit creation increases.

Nice explanation.

Thanks for explantion.