Question

Differentiate between SLR and CRR.

Answer 1

Statutory Liquidity Ratio (SLR) refers to liquid assets that the commercial banks must hold on a daily basis as a percentage of their total deposits. SLR is determined by the central bank and is a legal requirement to be fulfilled by the commercial banks whereas Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must have keep as cash reserves with the central bank. The ratio is fixed by the central bank and is varied from time to time to control the supply of money in the economy depending upon the prevailing situation of inflation or deflation.