CRR and SLR Explained
The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are reserve requirements that banks must maintain, used by the RBI to manage liquidity.
The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are reserve requirements that banks must maintain, used by the RBI to manage liquidity.
Cash Reserve Ratio
CRR is the portion of a bank's deposits that must be kept as cash reserves with the RBI. Banks earn no interest on it, and raising CRR reduces the funds available for lending.
Statutory Liquidity Ratio
SLR is the portion of deposits banks must hold in safe, liquid assets like cash, gold or approved government securities, before lending.
Why it matters for UPSC
The distinction between CRR and SLR — cash with the RBI vs liquid assets held by the bank — is a classic Economy Prelims topic.
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Practise PYQs →Frequently asked questions
What is the CRR?
The share of a bank's deposits that must be kept as cash reserves with the RBI.
How does SLR differ from CRR?
SLR is held by the bank itself in liquid assets like gold and government securities, whereas CRR is cash kept with the RBI.