BANKING AFFAIRS

Detailed explanation-1: -Technically, the cash reserves for a scheduled commercial bank must not fall below 6% of the total net demand and time liabilities (NDTL) that the bank holds on a fortnight basis. Earlier, CRR ranged from 3% to 20%; however, there is no upper or lower limit now.

Detailed explanation-2: -Minimum cash reserves is the reserve requirement which is a central bank regulation that sets the minimum amount of reserves that must be held by a commercial bank in order to advance loans to the public.

Detailed explanation-3: -What is CRR? In simple terms, the Cash reserve ratio is a certain percentage of cash that all banks have to keep with the RBI as a deposit. This percentage is fixed by the RBI and is changed from time to time by the central bank itself. Currently, the CRR is fixed at 3%.

Detailed explanation-4: -As announced in the Governor’s Statement dated May 04, 2022, it has been decided to increase the Cash Reserve Ratio (CRR) of all banks by 50 basis points from 4.00 percent to 4.50 percent of their Net Demand and Time Liabilities (NDTL), effective from the reporting fortnight beginning May 21, 2022.

Detailed explanation-5: -The Reserve Bank of India (RBI) has decided to gradually restore the cash reserve ratio (CRR) in two phases in a non-disruptive manner. The Cash Reserve Ratio will go up from 3 per cent to 3.5 per cent effective from March 27, 2021, and to 4.0 percent effective from May 22, 2021.