RBI increases CRR to 4% for non-scheduled UCBs
From July 12, 2014, non-scheduled Urban Co-operative Banks (UCBs) will have to keep more of their deposits with the central bank as the Reserve Bank of India (RBI) has raised the Cash Reserve Ratio (CRR) for these banks by 100 basis points to 4%. One basis point is equal to one hundredth of a percentage. The step will bring non-scheduled UCBs on par with scheduled primary UCBs. There are around 1,500 non-scheduled UCBs in India. To bring the primary UCBs on equal ground with commercial banks, the central bank slashed the Statutory Liquidity Ratio (SLR) requirement for them by 50 basis points to 22.50%.
- SLR is that portion of a bank’s deposits which the lender needs to keep in the form of gold, government bonds and securities. RBI has slashed the SLR requirement of banks to 22.5%.
- CRR is that part of a bank’s deposits that it needs to maintain with RBI. This money earns no interest. The current CRR level is 4%.