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June 14, 2026
The Dispatch

Definition

Cash Reserve Ratio (CRR)

The Cash Reserve Ratio is the share of a bank's deposits that it must keep with the RBI in cash, earning no interest, as a monetary policy and prudential tool.

Under CRR, banks must park a percentage of their net demand and time liabilities with the RBI as cash reserves. Raising CRR drains liquidity from the banking system and can curb credit and inflation; cutting it releases funds for lending.

Unlike the SLR, CRR balances earn no interest, so it also functions as a cost on banks. The RBI uses CRR alongside the repo rate and open-market operations to manage liquidity and transmit monetary policy through the banking system.

Related terms

  • Reserve Bank of India (RBI)The RBI is India's central bank and monetary authority, responsible for issuing currency, setting policy rates, regulating banks and managing the government's debt.
  • Monetary Policy Committee (MPC)The Monetary Policy Committee is the RBI body that sets the policy interest rate to achieve the government-mandated inflation target.
  • Statutory Liquidity Ratio (SLR)The Statutory Liquidity Ratio is the minimum proportion of deposits banks must hold in safe liquid assets such as government securities, cash or gold.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.