CRR vs SLR
CRR vs SLR for UPSC Prelims: cash reserve parked with RBI versus statutory liquid assets held by banks — form, interest, and applicability.
Start here
Cash Reserve Ratio (CRR) is the share of net demand and time liabilities banks must keep as cash with RBI; Statutory Liquidity Ratio (SLR) is the share they must hold in liquid assets such as government securities and gold.
When RBI wants banks to lend less, it can raise reserve ratios — effectively shrinking money banks can deploy. CRR and SLR both do this, but in different forms and with different rules.
Side-by-side comparison
| Feature | CRR | SLR |
|---|---|---|
| Objective | Liquidity control + solvency | Safe liquid assets + indirect govt funding |
| Applicability | Scheduled commercial banks | Broader — includes cooperative banks |
| Form of reserve | Cash balances only with RBI | Cash, gold, unencumbered G-Secs, and approved securities |
| Interest earned | No interest paid by RBI on CRR balances | Banks can earn return on G-Secs held for SLR |
| Legal basis | Section 42, RBI Act, 1934 | Section 24, Banking Regulation Act, 1949 |
| Current level (approx.) | 4.5% of NDTL (2024) | 18% of NDTL |
At a glance
Form
Cash only
Cash, gold, approved securities
Held with
RBI
Bank itself
Interest
No interest
Can earn return (e.g. on G-Secs)
₹100 deposit: what stays locked?
A bank receives ₹100 in deposits. If CRR is 4%, it must park ₹4 as cash with RBI — gone from lending desk, no interest. If SLR is 18%, another ₹18 stays in liquid assets (government securities, gold) with the bank itself — locked but can earn interest.
What this means for the exam
CRR = cash leaves bank to RBI. SLR = money stays in bank but cannot be freely lent.
Prelims statement check
“CRR can be maintained in the form of government securities.”
Incorrect — CRR form
CRR is maintained only as cash balances with RBI.
“SLR reserves are maintained with the RBI in the form of cash only.”
Incorrect — SLR custody
SLR assets are held by the bank itself — not parked as cash with RBI.
PYQ Linkage
Open Market Operations refers to:
Key Takeaway
CRR = cash with RBI, zero interest | SLR = liquid assets with bank, can earn return