| Definition |
Percentage of a bank’s total deposits that must be kept in cash with the central bank. |
Percentage of a bank’s total deposits that must be maintained in the form of liquid assets. |
| Form of Reserve |
Maintained only in cash. |
Maintained in gold, cash, or approved government securities. |
| Purpose |
Controls liquidity and inflation by reducing the money supply. |
Ensures bank solvency and regulates credit growth in the economy. |
| Held With |
Mandatory to be held with the central bank (e.g., RBI). |
Held by the bank itself in approved assets. |
| Impact on Liquidity |
Directly reduces the lendable funds of banks. |
Limits lending indirectly by locking funds in liquid assets. |
| Interest Earned |
No interest is earned on CRR balances with the central bank. |
Banks earn interest on government securities held as part of SLR. |
| Regulatory Role |
Used by central bank as a monetary policy tool to control inflation. |
Used to maintain liquidity and financial stability of banks. |
| Statutory Requirement |
Mandated under Section 42(1) of the RBI Act, 1934. |
Mandated under Section 24 of the Banking Regulation Act, 1949. |
| Variation Frequency |
Changed more frequently as a monetary policy tool. |
Changed less frequently; used more for long-term regulation. |
| Effect on Credit Availability |
Immediate impact on bank’s credit creation capacity. |
Moderate impact on credit availability due to asset holding. |
| Minimum Requirement |
RBI sets and updates periodically; currently around 4% (subject to change). |
Set by RBI, usually in the range of 18-20% (subject to change). |
| Liquidity Control |
Used primarily for controlling short-term liquidity. |
Focuses on long-term liquidity and solvency management. |
| Availability for Lending |
CRR portion is not available for any lending or investment. |
SLR assets can be liquidated or repoed to meet short-term needs. |
| Priority |
High-priority tool during inflationary pressures. |
More relevant during credit regulation or bank stability concerns. |
| Applicable To |
All scheduled commercial banks. |
All banking institutions in India. |
| Policy Tool Type |
Quantitative tool of monetary policy. |
Statutory requirement influencing bank behavior. |
| Market Impact |
Strong impact on interbank liquidity and overnight rates. |
Impacts long-term bond yields and market liquidity conditions. |
| Flexibility |
Highly flexible; can be adjusted frequently by RBI. |
Less flexible; linked to asset management and investment. |
| Compliance Monitoring |
Monitored daily by central bank. |
Monitored periodically and through statutory returns. |
| Historical Usage |
Used aggressively during inflationary periods (e.g., 1990s India). |
Raised during times of excessive credit expansion. |
CRR vs SLR