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Querist : Anonymous

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Querist : Anonymous (Querist)
05 February 2011 sir, i have a problem.
what is negative CRR.
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CA Shailesh Kumar Bhagat

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CA Shailesh Kumar Bhagat (Expert)
05 February 2011 Negative carry on CRR and SLR balances arises because the return on CRR balances is nil,
while the return on SLR balances (proxied using the 364-day Treasury Bill rate) is lower than
the cost of deposits. Negative carry on CRR and SLR is arrived at in three steps. In the first
step, return on SLR investment was calculated using 364-day Treasury Bills. In the second step,
effective cost was calculated by taking the ratio (expressed as a percentage) of cost of deposits
(adjusted for return on SLR investment) and deployable deposits (total deposits less the deposits
locked as CRR and SLR balances). In the third step, negative carry cost on SLR and CRR was
arrived at by taking the difference between the effective cost and the cost of deposits.
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