BANKING AFFAIRS

Detailed explanation-1: -The Cash Reserve Ratio is the amount of funds that the banks are bound to keep with Reserve Bank of India with reference to the demand and time liabilities (NDTL) to ensure the liquidity and solvency of the Banks.

Detailed explanation-2: -Every bank must have a particular portion of their Net Demand and Time Liabilities (NDTL) in the form of cash, gold, or other liquid assets by the end of the day. The ratio of these liquid assets to the demand and time liabilities is called the Statutory Liquidity Ratio (SLR).

Detailed explanation-3: -This is the RBI’s way of controlling the excess flow of money in the economy. The cash balance that is to be maintained by scheduled banks with the RBI should not be less than 4% of the total NDTL, which is the Net Demand and Time Liabilities.

Detailed explanation-4: -All Scheduled Commercial Banks are at present required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) of 5.00 per cent of the Net Demand and Time Liabilities (NDTL) (excluding liabilities subject to zero CRR prescriptions) under Section 42(1) of the Reserve Bank of India Act, 1934.