Cash Reserve Ratio - General Knowledge Today

Cash Reserve Ratio

The Cash Reserve Ratio is the amount of funds that the banks are bound to keep with Reserve bank of IndiaThe Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 with ....., with reference to the demand and time liabilitiesAny claim for money against the assets of a company, such as bills of creditors, income tax payable, debenture redemption, interest on secured and unsecured ..... (NDTL) to ensure the liquidity and solvency of the Banks. Please note that earlier RBI was empowered to fix RBI between 3-20% by notification. However, from 2006 onwards the RBI is empowered to fix the CRR on its discretion without any ceiling. The CRR is maintained fortnightly average basisIn a futures market, basis is defined as the cash price (or spot price) of whatever is being traded minus its futures price for the ......

What is impact of reducing CRR?

What is impact of Hiking CRR?

RBI uses the method of CRR hike to drain out the excess liquidity from the banks. This is because; the banks will now have to keep more money with the Reserve Bank of India In 1926, the Royal Commission on Indian Currency and Finance which is also known as the Hilton-Young Commission recommended the creation of a central bank. ...... On this money banks don`t earn any / much interest. Since they don't earn any interest, the banks are left with an option to increase the interest rates. If RBI hikes this rate substantially, banks will have to increase the loan interest rates. The home loans, car loans and EMI of floating Rate loans increase.

The following Graphic shows the history of CRR since 2000.

The above graphic shows that RBI has used this tool to contain the money supply and credit creation more frequently. Highest CRR was 9% when the Global Financial Slowdown had started taking definite shape. During the slowdown years the CRR was reduced gradually so that Banks have more money with them. Once, the signs of recovery are shown clearly, RBI made it again a little higher.

Last Updated: November 22, 2013

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Comments

  1. Abhishek Verma says:

    Superb presentation skill Sir....

  2. ipsita says:

    its so useful and easy to understand.thanks.

  3. akhilesh says:

    its really a very nice but there is a problem when download pdf there is not showing the chart........

  4. rohit salotra says:

    sir, its really helpfull for me being posted on very remote area nd hardly getting any magazine, thanks a lot sir, god blesss

  5. ramu says:

    Very Good .....Keep it up....

    ALl this information can be obtained in

    Hand Book of Banking Information

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    easy to understand

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  11. Mathan says:

    Perfect Explanation..Thank you G K Today

  12. vivekkk says:

    Sir CRR was explained in such a simplistic manner that menot being from a commerce background also had easily undrstood it in one reading

  13. eswari says:

    after read this only i got clear idea about this crr

  14. niraj762 says:

    Please update the CRR to 4.75% w.e.f Mar 12. There was a cut of 0.75% in CRR in Mar 12.

  15. Rahul says:

    CRR pe interest ka kya concept hai?

  16. seema says:

    Interest on CRR means if you are reserving Rs. 100 you will able to use Rs. 91 only

  17. Kmasha10 says:

    Really great and very use full for aspiring candidates.

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    sir suggest any books as more concepts of banking and include all information of banking....please.

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    thanks gk today for providing such a great service for youths and helping in shaping carerr by regular guide and ofcourse best site for enriching gk.

  21. neha says:

    thanks alot gk today group for providing such a g8 material ..........................

  22. MANORANJAN says:

    Kindly change current CRR Ratio 4.25% from 5.5% in the top of the paragraph. Because the current CRR Ratio is 4.25 from 1st Nov 2012

  23. Tuya says:

    Sir ...superb...mindblowing...U r great...U r backbone of many banking aspirants.......

  24. vikas ranjan says:

    Thanks a lots to GK Today Team for providing more effective GK supplements.

  25. Shanmugapriya says:

    Thanx a lot. Simple and easy to understand.

  26. rahul says:

    what is the meaning of drain out the excess liqidity ? why rbi increase crr if it is favorable to customer as well as for banks?

  27. goudgyellaiah says:

    THIS IS VERY VERY HELPFUL TO BANKING INTERVIEWERS

  28. ravikumar says:

    usefulllllllllllll infrmation thnk u s much

  29. sharma gsn on 21st jun,2013 says:

    It is very useful for the bank staff as well as the one who wants to go for bank jobs. Thanq very much.

  30. Mythili says:

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  33. hitesh says:

    sir, could you please tell me that when CRR increase or decrease, means which factors affect it ?

  34. yesbeer arya says:

    it so easy and useful knowledge provided
    sir for preparation.

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  36. raghee says:

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  37. shradhnjali says:

    really very useful thanks

  38. Nitish Bhardwaj says:

    Thanx sir....really nice & helpful

  39. sneha says:

    Thanks for making it so simple to understand