The document discusses the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements for banks in India. It notes that the RBI sets the minimum and maximum ratios for CRR (currently between 3-15%) and SLR (currently between 20-40%). It provides the current CRR and SLR rates, and explains how the ratios are calculated based on banks' net demand and time liabilities. It also discusses the impacts of increasing or decreasing these ratios, such as how a reduction in CRR or SLR increases banks' lending capacity.

1. Presented By
Bhavana B

2. Limit: The minimum value of CRR was statutorily fixed at
3% and the maximum was fixed at 15%.
Present CRR :
Cash Reserve
Ratio (CRR)
4.00%(w.e.f.
09/02/2013)announced on
29/01/2013
Decreased from
4.25% which was
continuing since
30/10/2012

3. Limit:The minimum value of SLR was fixed at 20% and
the maximum was fixed at 40%.
Present SLR:
Statutory
Liquidity Ratio
(SLR)
23%(w.e.f.
11/08/2012)
(announced on
31/07/2012)
Decreased from
24% which was
continuing since
18/12/2010

4. Continued…
- Rate of CRR & SLR is fixed by RBI and it is changed from
time to time , in the light of economic conditions
including inflation.
- This amount is calculated by banks with reference to
their net demand and time liabilities (the major part being
in the form of deposits).
-This balances is maintained as an average fortnightly
balance, that may fluctuate on daily basis.

5. Continued…
-At any time, the minimum balances must not go below the
percentage fixed by RBI as percentage of the average
fortnightly balance.
-In case of Default in maintaining CRR & SLR, there is
provision for interest payment by banks to RBI.
- If RBI decides to increase the percentage of CRR , then
available amount with the banks come down.
-RBI does not pay any interest to banks for the balances
maintained as CRR . But banks pay interest on the deposit
used for CRR.

6. Example(CRR):
Amount of net demand & time liabilities = 10000 Cr
Rate of CRR(assumed)
= 4%
Average cash balance to be maintained = 400 Cr
Impact of change in CRR:
-If CRR is Reduced, the cash balances maintained with
RBI would decline(and liquidity with banks increases ).
Corresponding amount is Increases lending capacity of
banks
-The increased lending increases their interest income
and leads to more profits

7. Example (SLR):
Amount of net demand & time liabilities = 10000 Cr
Rate of SLR(assumed)
= 23%
Average cash balance to be maintained = 2300 Cr
Impact of change in SLR:
- If SLR is reduced, it changes the fund deployment pattern.
-The funds freed from such investments, can be invested by
banks for lending purpose, to earn better returns.
- The returns on such securities are generally lower than the
interest paid on loans, although the risk is negligible in
investing in govt. securities