Is CRR the same as a company's cash ratio?

No. CRR is an RBI reserve requirement for banks. A company's cash ratio is a financial ratio used to assess its ability to cover short-term liabilities with cash and cash equivalents.

Does the RBI pay interest on CRR balances?

Banks do not earn interest on the mandatory CRR balances maintained with the RBI.

Is CRR calculated every day?

Banks maintain CRR within a prescribed reporting and maintenance framework based on NDTL. The requirement is monitored over the applicable maintenance period rather than being a new policy rate calculated each day.

Does a lower CRR always increase bank lending?

No. A lower CRR releases liquidity, but banks may choose how to deploy that liquidity based on loan demand, risk, funding conditions and other factors.

Can CRR be changed at any time?

The RBI can revise the prescribed CRR when monetary and liquidity conditions warrant it. Always check the latest RBI rate before relying on a CRR figure.

What is the current CRR in India?

As of August 2026, the RBI publishes the CRR at 3.00% and the SLR at 18.00%.

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Cash Reserve Ratio (CRR): Meaning, Formula and Rate

What is the Cash Reserve Ratio?

The Cash Reserve Ratio is the proportion of a bank's NDTL that it is required to maintain as cash reserves with the Reserve Bank of India.

CRR in one line

Bank's NDTL × prescribed CRR = required cash reserve with RBI

The RBI reduced CRR from 4.00% to 3.00% in stages during 2025, with 3.00% taking effect from 29 November 2025.

What is NDTL?

CRR is not calculated simply on “total deposits”.

It is based on Net Demand and Time Liabilities (NDTL), a regulatory measure of eligible liabilities.

Component	Examples
Demand liabilities	Liabilities payable on demand, including relevant current and savings deposits
Time liabilities	Liabilities payable after a period, including relevant fixed and recurring deposits
Netting/other regulatory adjustments	Treatment of liabilities and assets involving the banking system under RBI rules

How is CRR calculated?

Suppose a bank has ₹1,000 crore of applicable NDTL and the CRR is 3%.

Required CRR = ₹1,000 crore × 3% = ₹30 crore

Formula

CRR (%) = (Required cash reserve with RBI ÷ NDTL) × 100

How does a change in CRR affect the banking system?

If CRR rises

RBI raises CRR → banks keep more funds with RBI → system liquidity is absorbed → less balance-sheet liquidity is immediately available elsewhere

If CRR falls

RBI lowers CRR → banks need to keep less with RBI → liquidity is released into the banking system → banks have greater flexibility to lend, invest, or manage liquidity

A CRR cut does not automatically reduce every business loan rate. Lending rates also depend on policy rates, funding costs, credit risk, competition, and loan demand.

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Why does the RBI use CRR?

Liquidity management

Changing CRR directly changes the quantity of reserves banks must maintain with the RBI, making it a powerful liquidity-management tool.

Monetary conditions

By absorbing or releasing system liquidity, CRR can support the broader stance of monetary policy.

Banking-system reserve discipline

Banks are required to maintain prescribed reserves rather than deploy their entire liability base into loans or investments.

CRR is one part of the RBI's wider monetary and liquidity toolkit.

CRR vs SLR: what is the difference?

CRR	SLR
Cash Reserve Ratio	Statutory Liquidity Ratio
Current rate: 3.00%	Current rate: 18.00%
Maintained as prescribed cash reserves with RBI	Maintained by banks in eligible liquid assets
Directly affects reserves held with RBI	Can include cash, gold and eligible approved securities
CRR balances do not earn interest	Returns depend on the underlying SLR asset; not every SLR asset earns interest
Used as a direct liquidity-management instrument	Supports statutory liquidity requirements

Some SLR-eligible government securities can generate yield, but not every SLR asset earns interest.

Who decides CRR and SLR?

The Reserve Bank of India prescribes the applicable CRR and SLR requirements under its statutory powers.

The Monetary Policy Committee's statutory role centres on the policy repo rate. CRR and SLR are RBI reserve and liquidity tools.

What happens if a bank does not maintain CRR?

A CRR shortfall can attract penal interest linked to the Bank Rate, depending on the nature and duration of the deficiency. Banks therefore manage CRR within the RBI's prescribed maintenance and reporting framework.

Does CRR affect businesses?

Yes, but usually indirectly.

A CRR change can alter liquidity in the banking system, which can influence:

banks' funding and liquidity positions
credit availability
money-market conditions
lending and deposit behaviour

CRR is not the same as business liquidity

CRR applies to regulated banks. A company's own liquidity depends on cash, receivables, payables, working capital, and funding.

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