Page 20 - Insurance Times May 2019

maintain in the form of cash reserve with the central Risk mitigation tools, as seen above the RBI has tools that
bank.The objective of the CRR is to ensure that the banks helps in managing the risk of inflation going out of the
maintain a minimum level of liquidity against their liabilities defined band and also help in the boosting the economic
so that they don't run short of liquidity in case of excess growth.
demand for funds.
Considering the fall in the CPI inflation, the MPC has
The CRR do not earn interest and kept with RBI as a reserve reduced the repo rate from 6.5% to 6.25% in the February
to be used in case of an emergency. Increase in CRR would monetary policy.
mean that the RBI want to reduce the liquidity from the
market as higher cash is now to be kept with the RBI. Higher Risk Monitoring
CRR may be used to address the increasing inflation by The purpose of risk monitoring is to review the identified risks
reducing the money supply from the market. On the and its mitigation program. This helps in fine tuning both the
contrary, reduction in CRR help banks increase in liquidity risks identified as well as its mitigation plan. For example, the
that helps in growth but increases inflation. risks of inflation and GDP is to be regularly monitored so that
it does escape out of the tolerance limits. If there is any
The current CRR is 4% of the total deposits. improvement is needed in the risk management that may
need to be provided through the MPC meeting.
Statutory Liquidity Ratio (SLR)
The bi-monthly meeting helps in providing an oversight on
Every bank is to maintain a certain amount of money in
liquid assets with themselves in a form of cash or Gold. The to both risks and its mitigation plan in terms of repo rate
or any other tools that RBI may have used.
ratio of liquid assets to total deposits is referred as Statutory
Liquidity Ratio (SLR), the current SLR is 19.5%.
Risk Reporting
When RBI is to reduce the money supply from the market Risk reporting is part of risk management process where a
to control the inflation, they may increase the SLR, but this committee review the results of the risk management
does not help in the growth of the economy. On the previous steps. Here MPC is the committee that review the
contrary, reduction in SLR helps in money supply that boosts results on the bi-monthly basis and take the corrective
the growth but increases inflation. action to manage the risks.

Insurance Quiz

1. Which accounting major has been levied fine for negligence in auditing
2. Which companies has jointly launched digital insurance product

3. ____________ is a completely automated,technology based model which allows customers to buy policy instantly

4. Who has taken over as MD of LIC
5. Which insurance company has got approval for transacting general insurance business in India

6. The new rated for 3rd party insurance shall be valid from __________

7. The FAIR International Seminar was organised in India by________
The answers of the quiz are from this issue itself. Just go through our journal and you will find the answers. Send your
answers by Email to insurance.kolkata@gmail.com and you can get a chance to win an attractive gift. The gift will be
offered to the person giving all the correct answers. If we receive more than one entry with all correct answers the
name of winner will be drawn from lottery. The last date of receipt of entry is 25th May, 2019.
So Hurry and Submit your entry at the earliest !!!!

20 The Insurance Times, May 2019