The Role of Financial Indicators in Banking System
The MIBID and MIBOR
Priority Sector Lending (PSL)
Gross Domestic Product (GDP)
Rate of Inflation
Rate of Savings
Stock Market IndicesThe indicators and the role they play in the banking system are discussed below:
CASH RESERVE RATIO (CRR)
CRR is the amount of cash reserve that is required to be maintained by every bank inIndia, (other than a scheduled bank) by way of cash reserve either with itself or incurrent with RBI, SBI, or any other notified bank or partly with itself and partly in suchcurrent account.
It is computed as a percentage on the total Demand and Time Liabilities (DTL) of thebank.
It’s a statutory requirement stipulated under section 18 of the Banking Regulation Act,1949.
Presently, the CRR is 5% as fixed by the RBI.
Role of CRR:
If the RBI wants to put a check on credit expansion, it raises the CRR,conversely when it is required to induce, to facilitate credit expansion, theCRR is lowered.