How to Calculate CRR and SLR as per new guidelines issued by RBI (Master Direction in CRR AND SLR)

Calculating the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requires determining a bank's Net Demand and Time Liabilities (NDTL). Under RBI guidelines, the NDTL serves as the base for these calculations.

1. The Core Formula for NDTL

NDTL is calculated by netting off the liabilities of a bank with its assets held within the banking system.

Basic Formula:

• Demand Liabilities: Liabilities payable on demand (e.g., current accounts, demand portion of savings deposits, demand drafts, unclaimed deposits).

• Time Liabilities: Liabilities payable otherwise than on demand (e.g., fixed deposits, recurring deposits, time portion of savings deposits).

• Other Demand and Time Liabilities (ODTL): Items like interest accrued on deposits, bills payable, and unpaid dividends.

• Assets with the Banking System: This includes balances with other banks in current accounts, loans, or deposits repayable at call or short notice. If the "Assets with the Banking System" exceed the "Liabilities to the Banking System," the net interbank liability is treated as zero for the purpose of this calculation.

2. Calculating CRR and SLR

Once the NDTL is determined, the ratios are applied as follows:

• Reporting: Banks report their NDTL through specific statutory returns—Form A for CRR and Form VIII for SLR.

• Timing: CRR is calculated on the basis of NDTL with a lag of one fortnight (the reporting Friday of the previous fortnight).

3. Key Exclusions

Not all liabilities are included in the NDTL calculation. Common exclusions include:

• Paid-up capital, reserves, and retained profits.

• Refinance availed from the RBI or apex financial institutions like NABARD/SIDBI.

• Net income tax provision.

• Funds borrowed under market repo against government securities.

• Liabilities arising from the Bankers' Acceptance Facility (BAF).

Summary

To calculate these ratios:

1. Identify all liabilities (Demand, Time, and ODTL).

2. Subtract eligible assets (Assets with the banking system) to arrive at the NDTL.

3. Apply the prevailing percentage rates prescribed by the RBI to the NDTL base to find the required amount of reserves to be maintained.

Note: RBI updates these rates and guidelines periodically. Always refer to the latest Master Direction on CRR and SLR for the most current statutory percentages.