CRR and SLR

Definition

Two reserve requirements the RBI imposes on banks: the Cash Reserve Ratio (CRR), a share of deposits kept as cash with the RBI, and the Statutory Liquidity Ratio (SLR), a share kept in safe liquid assets.

Key points

• CRR is the percentage of a bank's net demand and time liabilities (NDTL) held as cash reserves with the RBI; banks earn no interest on it.
• SLR is the percentage of NDTL that banks must hold in liquid assets such as cash, gold and approved government securities, held by the bank itself.
• Raising the CRR or SLR reduces the funds banks can lend, tightening liquidity; lowering them does the reverse.
• The CRR is governed by the RBI Act and the SLR by the Banking Regulation Act, 1949; verify the latest ratios.
• Both are quantitative tools of concept monetary policy, alongside the concept repo rate.

Why it matters for CAPF

The CRR-versus-SLR distinction (cash with the RBI versus liquid assets with the bank) is a standard money-and-banking item.

Common confusion

CRR (cash, with the RBI, no interest) versus SLR (liquid assets including government securities, held by the bank); both differ from the concept repo rate (a price tool, not a reserve ratio).

Parent note

money and banking and the rbi