Cash Reserve Ratio (CRR): Meaning, Formula, Current Rate

The cash reserve ratio (CRR) is the share of a bank's deposits that it must keep as cash with the Reserve Bank of India (RBI), where it cannot be lent out or invested.

In brief:

• What it is: a fixed percentage of a bank's Net Demand and Time Liabilities (NDTL, roughly its total deposits) parked with the RBI.
• Who sets it: the RBI, through its Monetary Policy Committee (MPC), under Section 42 of the RBI Act, 1934.
• Why it matters: raising CRR pulls money out of the system and slows lending; cutting it frees cash for banks to lend.
• No interest: banks earn nothing on the CRR balance held with the RBI.
• Current rate: CRR is 3.00% as of 2026 (see the dated box below).

CRR is one of several tools the RBI uses to manage rupee liquidity and inflation, alongside the repo rate and the amount banks must hold in government securities.

If you run an export business and want the wider picture on how the rupee and rates shape your receipts, this guide to foreign exchange for Indian businesses is a useful companion.

Rates change at each monetary policy review, so treat the figures below as a dated snapshot and confirm the latest on the RBI website before you rely on them.

The RBI cut CRR by 100 basis points (from 4.00% to 3.00%) in four equal tranches of 25 basis points, effective from September to late November 2025.

This released about ₹2.5 lakh crore of liquidity into the banking system by December 2025 (as of 2026, CRR has held at 3.00%).

CRR full form: Cash Reserve Ratio.

Think of it as a compulsory savings rule for banks. For every ₹100 a bank takes in as deposits, the RBI says a small slice must sit idle with the central bank as cash.

At a 3% CRR, that slice is ₹3 out of every ₹100. The bank can use the rest for loans, but it can never touch the reserved portion for day-to-day business.

This does two things at once. It gives the RBI a lever to tighten or loosen how much money banks can lend, and it keeps a cushion of cash in the system so banks can meet withdrawals.

The formula is straightforward:

CRR reserve = NDTL x CRR%

Here NDTL is Net Demand and Time Liabilities, a measure of a bank's total deposits (current and savings balances plus fixed and recurring deposits, net of certain interbank items).

Worked example at the current 3% rate:

• A bank holds ₹100 crore in NDTL (deposits).
• CRR is 3.00%.
• Reserve parked with the RBI = ₹100 crore x 3% = ₹3 crore.
• Cash left to lend or invest = ₹100 crore minus ₹3 crore = ₹97 crore.

If the RBI raised CRR to 4%, the same bank would have to park ₹4 crore and could lend only ₹96 crore. A single percentage point moves ₹1 crore out of lending for every ₹100 crore of deposits.

Banks do not have to hold the exact amount every single day. CRR is maintained on a fortnightly average basis, with a daily minimum the bank must keep on any given day.

No. The RBI does not pay any interest on the cash banks hold with it as CRR.

This has been the position since 2006, when an amendment to the RBI Act removed the earlier floor that allowed some interest on these balances.

Because the reserve earns nothing, a higher CRR is a real cost to banks: money that could have earned a lending return instead sits idle.

CRR works as a tap on the money flowing through banks. The cause and effect runs like this:

When CRR goes up, banks have less to lend, credit gets tighter and borrowing costs tend to firm up, which helps rein in inflation.

When CRR comes down, banks have more to lend, credit loosens and rates tend to soften, supporting demand.

Because CRR changes the quantity of money banks can lend rather than judging where it goes, it is a quantitative monetary tool, not a qualitative one.

These three sit at the heart of RBI monetary policy but do different jobs. CRR is cash with the RBI; SLR is assets held by the bank itself; the repo rate is the price of short-term RBI funding.

The related bank rate and reverse repo rate are also RBI tools, but for most explanations CRR, SLR and the repo rate are the three that matter.

For the currency side of the picture, our explainer on forex rates shows how these policy levers feed through to the rupee.

CRR is maintained under Section 42 of the Reserve Bank of India Act, 1934. This is the statute under which the RBI can require scheduled commercial banks to keep a cash reserve with it.

By contrast, the SLR is prescribed under Section 24 of the Banking Regulation Act, 1949. Keeping the two Acts straight is a common exam and interview point.

Incremental CRR (ICRR) is a temporary, additional reserve the RBI can ask banks to hold on the growth in their deposits over a set period, on top of the regular CRR.

The RBI uses it as a short-term tool to absorb surplus liquidity, for example after a large inflow of deposits into the system, then withdraws it once conditions normalise. It is occasional and situational, not a permanent rate.

It depends on whose books you are reading:

• For the commercial bank, the CRR balance is an asset (money it owns, held with the RBI).
• For the RBI, that same balance is a liability (money it owes back to the bank).

This mirror image is why CRR appears on both balance sheets, just on opposite sides.

The concept is the same nationwide; only the phrasing changes. A quick reference:

The CRR formula stays identical in every language: reserve equals NDTL multiplied by the CRR percentage.