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CASH RESERVE RATIO

NANDURI RAVI SURYA NARAYANA MU (ACCOUNTANT) (194 Points)

25 June 2008

Please guide me any body,

Respected Sir/Madam

What is ment by Cash Reserve Ratio. What is the role of this in nations economy. Why always RBI monitoring CRR rate. Please give details for this.

What is ment by Repo Rate? Please explain

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4 Replies

ram rahim (Article Assistant) (188 Points)
Replied 25 June 2008

cash reserve ratio is the percentage of the total deposits a bank has which it needs to keep with RBI. RBI regulates it to control the flow of money in the market. It is one of the traditional tool that the regulator use to control the money available in the market for credit purposes and as a consequence control the inflation rate. An increase in CRR limits the ability of a bank to grant more loans, thereby controlling the flow of money in the market. traditionally it is expected the hike in CRR results in decrease in inflation rate. The vice versa also holds true... Repo rate is the rate of interest at which RBI gives loan to banks...

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Shekar (CA & LCS ) (1109 Points)
Replied 25 June 2008

Repo rate is a rate at which commercial banks can borrow money from RBI.

Even Repo rate is used as a tool to counter Inflation.RBI hikes Repo rate to have a check on liquidity in the economy.

srikumar (audit staff) (1203 Points)
Replied 29 May 2013

sir,pls explain clearly ,what is cash reserve ratio and statutory liquidity ratio? why rbi control both ? i am totally confused... by srikumar articled assistant

srikumar (audit staff) (1203 Points)
Replied 04 September 2013

crr means if you deposit money in your a/c rs.1000 bank paid rs.40 to rbi(CRR rate 4%) your money maintain by rbi. Because control money supply in our country . therefore inflation increase rbi increase CRR rate .

SLR is securities for govt (i.e) bonds, deeds, debentures etc.

repo rate is commercial banks borrow money from rbi to meet our financial needs . in order to reverse is repo reserve rate is rbi borrow from banks . banks give money to rbi happily because our money is safest with rbi . in case rbi gibes interest to banks

visit rbi website view every day CRR, SLR rate