what is the difference between cash reserve ratio and statutory liquidity ratio?
CRR is the statutory reserve that has to be maintained by banks either in cash or as balance with the Reserve Bank of India. CRR is intended to be a reserve by which the RBI assures itself that the bank is safe and has the liquidity for servicing its depositors. As per Section 42 of the RBI Act, RBI is allowed to announce any level of CRR depending on the market conditions within a certain band, the minimum being 3% and the maximum 15% of NDTL. whereas SLR is the statutory reserve that is set aside by banks for investment in cash, gold or unencumbered approved securities valued at a price not exceeding the current market price. SLR should not be less than 25% and not exceeding 40% of NDTL as per Section 24 of the Banking Companies Regulation Act. The effective SLR level that a bank has to maintain keeps changing depending on the announcement by the RBI in its credit policies The objectives of SLR are 1) to restrict the expansion of bank credit 2) to augment the investment of the banks
