Cash Reserve Ratio
The cash reserve ratio (CRR) is a requirement set by the central bank of a country (in India, it is the Reserve Bank of India) for the commercial banks to hold a certain percentage of their deposits in the form of cash. The central bank uses the CRR as a tool to regulate the money supply in the country, and it can increase or decrease the CRR as needed to achieve its monetary policy goals. For example, if the central bank wants to reduce the money supply, it can increase the CRR, which will require commercial banks to hold a larger portion of their deposits in the form of cash, rather than lending them out or investing them. This can help to reduce the amount of credit available in the economy and slow down economic growth.
Statutory Liquidity Ratio
The statutory liquidity ratio (SLR) is a requirement set by the central bank of a country (in India, it is the Reserve Bank of India) for commercial banks to hold a certain percentage of their deposits in the form of liquid assets. The purpose of the SLR is to ensure that commercial banks have a minimum level of liquid assets on hand to meet the demand for withdrawals from depositors, and to provide a buffer to protect the stability of the financial system in case of a financial crisis. The SLR is expressed as a percentage of a bank's net demand and time liabilities (NDTL), which are the total deposits held by the bank that are payable on demand (such as checking accounts) or at a fixed date (such as savings accounts and certificates of deposit). In India, the SLR is currently set at 18%. This means that commercial banks are required to hold 18% of their NDTL in the form of liquid assets, such as cash, gold, or approved securities.
Net Demand and Time Liabilities
Net demand and time liabilities (NDTL) are the total deposits held by a commercial bank that are payable on demand (such as checking accounts) or at a fixed date (such as savings accounts and certificates of deposit). The NDTL is used as the base for calculating the statutory liquidity ratio (SLR), which is a requirement set by the central bank of a country (in India, it is the Reserve Bank of India) for commercial banks to hold a certain percentage of their deposits in the form of liquid assets. The purpose of the SLR is to ensure that commercial banks have a minimum level of liquid assets on hand to meet the demand for withdrawals from depositors, and to provide a buffer to protect the stability of the financial system in case of a financial crisis. The SLR is expressed as a percentage of a bank's NDTL, and it is currently set at 18% in India. This means that commercial banks are required to hold 18% of their NDTL in the form of liquid assets, such as cash, gold, or approved securities.
Repo Rate
The repo rate, also known as the benchmark interest rate, is the rate at which the central bank of a country (in India, it is the Reserve Bank of India) lends money to commercial banks. The repo rate is an important monetary policy tool that is used to regulate the supply of money in the economy and control inflation. When the central bank increases the repo rate, it becomes more expensive for commercial banks to borrow money, which can help to reduce the money supply and slow down economic growth. On the other hand, when the central bank decreases the repo rate, it becomes cheaper for commercial banks to borrow money, which can increase the money supply and stimulate economic growth. The repo rate is one of several tools that the central bank can use to achieve its monetary policy goals, and it can adjust the repo rate as needed to meet these goals.
Reverse Repo Rate
The reverse repo rate is the rate at which the central bank of a country (in India, it is the Reserve Bank of India) borrows money from commercial banks. It is the opposite of the repo rate, which is the rate at which the central bank lends money to commercial banks. The reverse repo rate is an important monetary policy tool that is used to regulate the supply of money in the economy and control inflation. When the central bank increases the reverse repo rate, it becomes more attractive for commercial banks to lend money to the central bank, which can help to reduce the money supply and slow down economic growth. On the other hand, when the central bank decreases the reverse repo rate, it becomes less attractive for commercial banks to lend money to the central bank, which can increase the money supply and stimulate economic growth. The reverse repo rate is one of several tools that the central bank can use to achieve its monetary policy goals, and it can adjust the reverse repo rate as needed to meet these goals.