Banks cannot deploy every rupee they receive. A prescribed portion must be maintained with the Reserve Bank of India through the Cash Reserve Ratio (CRR).
CRR is one of the RBI's tools for influencing banking-system liquidity.
As of August 2026, the RBI's published CRR is 3.00%, while the Statutory Liquidity Ratio (SLR) is 18.00%.
CRR is one of the RBI's tools for influencing banking-system liquidity.
As of August 2026, the RBI's published CRR is 3.00%, while the Statutory Liquidity Ratio (SLR) is 18.00%.
TL;DR
- CRR stands for Cash Reserve Ratio and is the percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be maintained as cash reserves with the RBI.
- The current CRR is 3.00% as of August 2026; the RBI can revise it as monetary and liquidity conditions change.
- A higher CRR absorbs banking-system liquidity, while a lower CRR releases liquidity. The effect on individual lending rates is indirect, not automatic.
- CRR and SLR are different: CRR is maintained with the RBI, while SLR is maintained by banks in specified liquid assets.
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 Ă— 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 â‚ą1,000 crore of applicable NDTL and the CRR is 3%.
Required CRR = â‚ą1,000 crore Ă— 3% = â‚ą30 crore
Formula
CRR (%) = (Required cash reserve with RBI Ă· NDTL) Ă— 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.
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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