CRR, SLR, Bank Rate, Repo Rate etc.

Bank Rate
Rate at which RBI lends to commercial banks. This tool is used by central bank for short-term purposes. Increase in Bank Rate by RBI is indication to banks to increase lending and deposit rates.

 

Repo Rate
Rate at which the RBI lends short-term money to the banks against securities. Increase in Repo rate leads to increase in lending rates of banks and vice-versa.

Reverse Repo rate
Rate at which banks RBI pays for the short-term deposits of banks. This is opposite of Repo Rate.

Cash Reserve Ratio (CRR)
Banks to hold a certain percentage of their deposits in the form of cash/ deposit with RBI.

Statutory Liquidity Ratio
Bank to maintain at the close of business every day, certain minimum percentage of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-encumbered approved securities.

 

	CRR	SLR
Statutory basis	Sec. 42 (1) of RBI Act, 1934	Sec. 24 (2.a) of Banking Regulation Act, 1949
Minimum          and maximum	At RBI’s Discretion	Minimum :RBI discretion Maximum :40%
Form in which maintained	Cash balance with RBI	Cash      in      hand,      Gold/ investment in approved Govt. Securities / net Bank balance     with     scheduled commercial banks
Computation	Percentage of NDTL on fortnightly average basis.	Percentage of NDTL on daily basis on last Friday   of   2nd   preceding fortnight
Interest	No interest payable	As per           class                     of securities in which investment is made
Penal interest for default 1st day/ Next day	3% p.a. above bank rate 5% p.a. above bank rate	3% p.a. above bank rate 5% p.a. above bank rate
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