CRR vs SLR: the difference, in plain terms
Every banking exam asks this, and most candidates lose the mark on the same detail. CRR and SLR are not two names for the same rule: one takes money out of the bank entirely and pays nothing on it, the other stays with the bank and still earns interest.
| CRR | SLR | |
|---|---|---|
| Full form | Cash Reserve Ratio | Statutory Liquidity Ratio |
| Where the money sits | With the RBI | With the bank itself |
| Held as | Cash only | Gold, cash or government securities |
| Interest earned | None | Yes, the bank earns on it |
| Governed by | RBI Act, 1934 | Banking Regulation Act, 1949 |
| Main purpose | Controls liquidity in the system | Ensures the bank stays solvent |
🧠 CRR goes OUT (to the RBI, earning nothing). SLR stays IN (with the bank, still earning).
Points that get asked
- Both are computed on NDTL, Net Demand and Time Liabilities, essentially the bank's deposits.
- Raising CRR pulls money out of the system, so banks have less to lend. It is a liquidity tool.
- SLR is about safety: the bank must hold liquid assets it can fall back on before it lends freely.
- A common trap: SLR can be held in gold and approved securities, not just cash. CRR cannot.
Frequently asked
Does a bank earn interest on CRR?
No. CRR is kept with the RBI in cash and earns the bank nothing. SLR is different, it is held by the bank in gold or government securities, which do earn a return.
Which Act governs CRR and SLR?
CRR comes under the RBI Act, 1934. SLR comes under the Banking Regulation Act, 1949. Exams frequently swap these two in the options.
What happens when the RBI raises CRR?
Banks must park more cash with the RBI, so less money is available to lend. It tightens liquidity and is used to cool inflation.
Are CRR and SLR calculated on the same base?
Yes, both are a percentage of NDTL (Net Demand and Time Liabilities). Only the treatment of the money differs.
Last updated 2026-07-28