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What is What is What is What is What is What is Basel II
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CRR? SLR? PLR? Repo Rate? Reverse Repo Rate? Sub prime lending?
WHAT IS CRR ?
CRR Stands for Cash Reserve Ratio A CRR is the % of bank Reserve to Deposit and Notes, CRR is the amount of Funds that the banks have to keep with RBI If RBI decides to increase the % of this, the available amount with the banks comes down RBI increases CRR rate to pull out the excessive money from the banks It is also Known as Cash Asset Ratio or Liquidity Ratio CRR is used as tool in Monetary Policy, which influence Countrys Economy, Borrowing and Interest Rates across the country
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WHAT IS SLR?
SLR stands for Statutory Liquidity Reserve/Ratio Statutary Liquidity Reserve/Ratio(SLR) is percentage of deposits the bank has to maintain in form of gold, cash or other approved securities. It regulates the credit growth in India Every financial institute is required to maintain a Statutory Liquidity reserve (SLR) of 25% (including CRR) on all its liabilities.
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WHAT IS PLR?
PLR stands for Prime Lending Rate. The interest rate that commercial banks charge their best, most creditworthy customers. It is minimum lending rate at which credit line is offered to prime borrowers
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BASEL II NORMS
The Basel Committee consists of representatives from central banks and regulatory authorities of the G 10 countries, plus others (specifically Luxembourg and Spain). Basel II defines three approaches for calculating credit risk weights to accommodate different levels of sophistication across banks: The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: Credit Risk, Operational Risk & market Risk. Other risks are not considered fully quantifiable at this stage. The second pillar deals with the regulatory response to the first pillar, giving Regulators much improved 'tools' over those available to them under Basel I. It also provides a framework for dealing with all the other risks a bank may face, such as Systemic Risk, Pension Risk, Strategic Risk, Reputation Risk, Liquidity Risk & Legal Risk, which the accord combines under the title of residual risk The third pillar greatly increases the Disclosure that the bank must make. This is designed to allow the market to have a better picture of the overall risk position of the bank and to allow the counterparties of the bank to price and deal appropriately
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