BANKING AFFAIRS

Detailed explanation-1: -Cash Reserve Ratio and Statutory Liquidity Ratio by the Scheduled Commercial Banks, Reserve Bank of India has prescribed statutory returns i.e. Form A return (for CRR) under Section 42 (2) of the RBI, Act, 1934 and Form VIII return (for SLR) under Section 24 of the Banking Regulation Act, 1949.

Detailed explanation-2: -Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash. Click here to know about SLR & Repo Rate. Current cash reserve ratio is at 4%, this will be changed to 4.5% from May 21st.

Detailed explanation-3: -CRR – Meaning Commercial banks must maintain the CRR in the form of cash balances with the RBI. These banks are not allowed to use the money for economic or commercial purposes. Essentially, CRR represents the minimum percentage of deposits that a commercial bank must keep as a cash reserve with the RBI.

Detailed explanation-4: -38/12.01. 001/2020-21 dated February 05, 2021, the Reserve Bank of India hereby notifies that the average Cash Reserve Ratio (CRR) required to be maintained by every bank shall be 4.50 per cent of its net demand and time liabilities effective from the reporting fortnight beginning May 21, 2022.

Detailed explanation-5: -Reserve Bank of India does not pay any interest on the CRR balances maintained by SCBs. Loans out of Foreign Currency Non–Resident Accounts (Banks), (FCNR [B] Deposits Scheme) and Inter-Bank Foreign Currency (IBFC) deposits shall be included as part of bank credit for the purpose of these Directions.