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Why should CLR taken by bank


  1. #1
    Ramanathan Guest

    Question Why should CLR taken by bank

    Why should CLR taken by bank??? For what reason please explain it fully?

  2. #2
    Aarish Rizvi's Avatar
    Aarish Rizvi
    Aarish Rizvi is offline eTI Bronze
    I think you are talking about CRR which is cash reserve ratio. So I will try to explain Cash reserve Ratio (CRR) which is an amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks comes down. The RBI uses the CRR to drain out excessive money from the system.

    Scheduled banks are required to maintain with the RBI an average cash balance, the amount of which shall not be less than 4% of the total of the Net Demand and Time Liabilities (NDTL), on a fortnightly basis.

    In short, to control inflation and the growth, RBI or Reserve Bank of India uses certain tools like CASH RESERVE RATIO, STATUTORY LIQUIDITY RATIO, REPO RATE, and REVERSE REPO RATE .

    There is whole lot which can be written about it, I suggest let me know where you have confusion so that we can specifically work on that.

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