Cash Reserve Ratio

The reserve requirement (or Cash reserve ratio) is a bank regulation that sets the minimum reserve so that each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank. Reserve requirements affect the potential of the banking system to create transaction deposits.

    A cash reserve ratio (or CRR) is the percentage of bank reserves to deposits and notes. It is also known as the cash asset ratio or liquidity ratio.

                                               Balance in NRB 

                                             CRR =

                                                                        Total Deposit

                    Table No. 5 Calculation of Cash Reserve Ratio

Year	Balance in NRB	Total Deposit	CRR
2061/62	390,025,828	8,654,774,214	4.51%
2062/63	626,123,385	11,002,040,633	5.69%
2063/64	556,678,464	11,445,286,030	4.86%
2064/65	403,810,203	13,715,394,960	2.94%
2065/66	444,138,596	27,957,220,794	1.59%
Average Ratio			3.91%

Trend Diagram: 2 Position of Cash Reserve Ratio

 

 As per NRB regulation every commercial banks is to maintain its CRR 5% per annum. The above trend diagram shows that Nepal SBI has maintained the standard level of CRR.