You are on page 1of 1

CRR stands for Cash Reserve Ratio.

It is a percentage of Bank Deposits that Banks are supposed to maintain with Central Bank. When Inflation is High ( Money supply is high), BB increases the CRR Rate, this will mean, Commercial Banks will have to keep more percentage of deposits with BB. This in turn will reduce the commercial bank's Lending capacity. When lending capacity is reduced, money supply in the economy will be less. SLR: Statutory Liquidity Ratio. It is a part of deposits that Commercial Banks are supposed to maintain with THEMSELVES IN LIQUID FORM. Liquid form means: Cash, Gold or Government Bonds. This is to ensure sufficient Liquidity with Commercial Banks. NOTE: BANGLADESH BANK HAS INCREASED CRR TO 6% FROM EXISTING 5.5% AND SLR TO 19% FROM EXISTING 18.5%.