Quick Guide to Terms Used in Day to

Day Banking
 Index
 What is CRR?
 What is SLR?
 What is PLR?
 What is Repo Rate?
 What is Reverse Repo Rate?
 What is Sub prime lending?
 Basel II

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 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 Country’s 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 credit-
worthy customers.
 It is minimum lending rate at which
credit line is offered to prime
borrowers

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 WHAT IS REPO RATE?
 When the banks are having Shortages
of Funds, they borrow it from RBI.
 Repo Rate is the Rate at which banks
borrow money from RBI.
 Low Repo Rate means banks are
getting cheaper rate loans from RBI.
 When Repo Rate increases borrowing
from RBI becomes more expensive
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WHAT IS REVERSE REPO RATE?
 Reverse Repo rate is the rate at which RBI
borrows money from banks.
 Banks lend the money to RBI for
safeguarding the money with good amount
of interest
 An increase in Reverse repo rate can cause
the banks to transfer more funds to RBI
due to this attractive interest rates. It can
cause the money to be drawn out of the
banking system.

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 WHAT IS SUB PRIME LENDING?
 Sub Prime Lending is lending at a higher
rate than the Prime Rate.
 Type of Loan offered at Rate above Prime to
individuals who do not qualify from Prime
Lending Rate loans.
 A subprime loan is offered at a rate higher
than Business loans due to the perceived
increased risk.
 Subprime lending includes a variety of
credit instruments, including subprime
mortgages, subprime car loans, and
subprime credit cards etc.
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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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