CRR & SLR
Two RBI rules forcing banks to set aside a fixed share of every deposit — as cash with the RBI (CRR) or as safe liquid assets (SLR) — before they can lend the rest.
Explain it like I'm 10
Imagine a rule that says every time you receive ₹100, you must lock away ₹3 in a safe you can't touch, and put another ₹18 into government-backed savings bonds you also can't touch — leaving you free to actually spend or lend out only the remaining ₹79. That's essentially what the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) do to every bank in India: CRR locks away a slice of deposits as cash with the RBI, earning no interest at all, and SLR locks away another slice in approved liquid assets like government bonds — both designed to keep the banking system safe and to give the RBI a lever over how much money banks have free to lend.
The formula
CRR & SLR are both set as a % of a bank's Net Demand & Time Liabilities (NDTL) — broadly, its total deposits Current (2026): CRR = 3.00% (cut from 4.00% via four 0.25-point steps, Sep–Nov 2025) SLR = 18.00% (held steady) CRR cut released ≈ ₹2.5 lakh crore of banking-system liquidity
Who calculates it
The RBI's Monetary Policy Committee and Central Board set the CRR; the SLR is set by the RBI under the Banking Regulation Act, 1949.
Where this number can mislead you
- ⚠A CRR cut releases liquidity into the banking system, but it doesn't guarantee banks actually lend that money out faster — banks can simply hold the freed-up cash as excess reserves rather than expanding credit.
- ⚠As CRR is progressively lowered, the RBI has less of this particular non-interest-bearing lever available, shifting more of monetary policy's transmission weight onto the repo rate channel alone.
- ⚠SLR effectively channels a fixed share of bank deposits into government securities — critics argue this is a form of captive government financing that can, at the margin, crowd out banks' capacity to lend to the private sector.
- ⚠CRR and SLR requirements apply to scheduled commercial banks specifically; they don't directly constrain NBFCs, so their effect on the broader (bank-plus-NBFC) credit system is only partial.
Reality check
The RBI's cut of CRR to an all-time low of 3.00% through late 2025, via four separate 0.25 percentage point reductions, released an estimated ₹2.5 lakh crore of liquidity into the banking system — a deliberate companion move to its simultaneous repo rate cuts, intended to make sure banks actually had the spare cash on hand to lower lending rates in practice, not just a lower policy rate on paper.
Test yourself
What is the Cash Reserve Ratio (CRR)?