What is Cash Reserve Ratio? CRR, SLR Definition, Difference, Formula – Check Complete Details

Cash Reserve Ratio

Even in the digitization world, somehow but lots of citizen don’t know that what is Cash Reserve Ratio? Thus, to make aware all about CRR and SLR Meaning we have well discuss Definition, Difference, Formula of same in this article for your sake. Cash Reserve Ratio maintains the controls of excess money flow in the economy for the purpose to create economical balance. Visitors to know that, what Cash Reserve Ratio is, must read out below structured page.  

Cash reserve ratio in India keeps on changing day by day, overseeing cash supply and controlling swelling, additionally. Increasing the CRR, symbolize that bank have lesser cash to loan this will make lesser flow of money as Hike in CRR, increases of interest rates on loans provided by banks, whereas, decrease in CRR will leads to high flow of cash outside the banks at lesser rate. We the team of indguru.com has well customized this page regarding what is Cash Reserve Ratio? To check thoroughly about CRR and SLR go through below presented information.

Definitions of CRR and SLR

What is Cash Reserve Ratio?

Cash Reserve Ratio Definition

Cash Reserve Ratio is the rate of   amount of funds that the banks have to keep with Reserve bank of India / Central bank as portion of Net Demand and Time Liabilities (NDTL). CRR is maintained to ensure the liquidity and solvency of the Banks.


Cash Reserve Ratio (CRR) is a tool which central bank used to control liquidity in banking system. In other words, CRR aims to ensure that banks do not make over flow of cash to meet the payment demands of their depositors.

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Impacts of CRR

  • Increasing in the Rate of Cash Reserve Ratio, means bank have lesser cash to provide loan.
  • Hike in CRR will increases the interest rates on loans provided by banks.
  • Decrease in CRR, decreases the interest of rates on loans and it leads to high flow of cash outside the banks at lesser rate.
  • Basically it manages the economical balance in the economy.

Cash Reserve Ratio formula

Cash Reserve Ratio is a fraction of deposits that banks hold in reserves, it is 1/10 of deposits that means bank must keep 1/10, or ten cents, of every dollar in deposits in reserves.


IF someone deposits Rs 100 in bank and CRR is 10%, then bank will have to hold Rs 10 with the central bank as reserve and commercial bank will be able to use Rs 90 for investments and/or lending or credit purpose or granted loan.

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What is Statutory Liquidity Ratio?


Statutory Liquidity Ratio refers SLR it is the proportion of deposits in commercial bank which is required to maintain forms of liquid assets in addition to the cash reserve ratio.


Statutory liquidity ratio is maintained and determined by the central bank in order to control the bank credit. This will ensure the solvency of commercial banks and compels bank to invest in government securities. Change in the percentage of SLR will lead to increased or decreased the flow of bank credit in the economy. In case if, central bank has decided to control the bank credit for curbing inflation the SPR will be raised on the other hand, when economy faces recession then central bank will cut down the SLR rates to  increase the bank credit.


Liquid assets such as precious metals (Gold) or other approved securities must be reserve to financial institution and this maintains reserves other than the cash.

What is Repo rate?

Repo rate is that rate at which RBI give cash to banks against vow of government securities, at that time banks need assets to meet their everyday commitments.

Current CRR Rate
IndicatorCurrent rate
SLR20 %
Repo rate6.0%
Reverse repo rate5.75%
Marginal Standing facility rate6.25%

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Difference between Cash Reserve Ratio and Statutory Liquidity Ratio
Basis For ComparisonCRRSLR
MeaningCash Reserve Ratio is the percentage of total money which has to be kept with the Central Bank of India in the form of cash.Whereas, Statutory Liquidity Ratio is the certain percentage of Net Time and Demand Liabilities bank certain percentage of their Net Time and Demand Liabilities which has to kept in the form of liquid assets as specified by RBI.
FormCashCash and other liquid assets such as Gold, government securities viz. Central and State government securities.
EffectCRR controls excess money flow in the economy.SLR helps in meeting out unexpected demand of depositor by selling bonds
Maintenance withCentral Bank of India i.e. RBI.Bank itself
RegulatesLiquidity in the economy.Credit growth in the economy
EarningsBanks don’t earn any returns from CRRBanks can earn returns from SLR
Percentage RatePresent rate of CRR is 15 to 3%present SLR is 20.75%, but RBI has the power to increase it up to 40%

Increase of CRR leads to-

Hike in CRR, increases of interest rates on Loans provided by the Banks.

Cash Reserve Ratio is Tool of which policy?

Cash Reserve Ratio is Tool of Monetary Policy.

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