CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) are important reserve requirements that commercial banks must maintain with the RBI. These tools help control liquidity in the economy.
🔹 CRR – Cash Reserve Ratio
- It is the percentage of a bank’s total deposits that must be maintained with the RBI in cash form.
- Purpose: To control inflation and ensure liquidity in the banking system.
🔹 SLR – Statutory Liquidity Ratio
- It is the percentage of a bank's total deposits that must be kept in the form of gold, cash, or approved securities (mostly government bonds).
- Purpose: To ensure the bank’s solvency and control credit expansion.
📊 Key Differences
| Aspect | CRR | SLR |
|---|---|---|
| Form of Reserve | Cash only | Cash, gold, or securities |
| Where Maintained | With RBI | With bank itself |
| Effect | Reduces bank’s lending capacity | Maintains bank’s liquidity |
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