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Difference between Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)


Cash Reserve Ratio: The fixed percentage of deposited money in a bank is kept with central bank (Reserve Bank of India) is known as cash reserve ratio and also known as CRR. The cash reserve ratio helps to control the flow of money in an economy.

Statutory Liquidity Ratio: The fixed percentage of liquid assets like government bonds, gold etc. is kept with bank itself is known as statutory liquidity ratio. It helps to limit the credit expansion of a bank in an economy.
The cash reserve ratio and statutory liquidity ratio both are mandatory by central bank of India.
Let’s find out the difference between cash reserve ratio and statutory liquidity ratio:

Point of difference
Cash Reserve Ratio
Statutory Liquidity Ratio
What is cash reserve ratio and statutory liquidity ratio?
The fixed percentage of total deposited amount in a bank is kept with central bank as a reserve is known as cash reserve ratio.
The fixed percentage of total deposited amount of bank is kept by bank itself in the form of liquid assets is known as statutory liquidity ratio.
What is the purpose of maintaining cash reserve ratio and statutory liquidity ratio?
The purpose of maintaining the cash reserve ratio is to control the flow of money in an economy.
The purpose of maintaining the statutory liquidity ratio is to limit the credit expansion of bank in an economy and when customer demanded money from bank then at that time bank sell its liquid assets to fulfil the demand of its customer.
In which form cash reserve ratio and statutory liquidity ratio are kept?
The fixed percentage of bank total deposit has keep with central bank in the form of cash. The percentage of cash reserve is decided by central bank.
The fixed percentage of bank net demand and time liability has keep with bank itself in the form of liquid assets like government securities. The percentage of statutory liquidity ratio is also decided by central bank.
How to use cash reserve ratio and statutory liquidity ratio to control the monetary flow in an economy?
The central bank of India reduces the cash reserve ratio to increase the flow of money in an economy and if bank wants to decrease the flow of money in an economy it increases the cash reserve ratio percentage.
The central bank of India reduces the statutory liquidity ratio to increase the credit limit of the bank which increases the flow of money in an economy but it reduces the solvency capacity of a bank and if bank wants to decrease the credit limit in an economy it increases the statutory liquidity ratio percentage. By increasing the percentage rate the flow of money by bank in an economy is reduces.
What is the present rate of cash reserve ratio and statutory liquidity ratio?
The present rate of cash reserve ratio is 4%.
The present rate of statutory liquidity ratio is 19.25%. It will be decreases by 25 basis point in each quarter until it reaches 18%.(January 2019)



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