Difference between CRR and SLR (Easy Explanation for UPSC)
| Point of Difference | CRR (Cash Reserve Ratio) | SLR (Statutory Liquidity Ratio) |
|---|---|---|
| Meaning | Percentage of deposits banks keep with RBI in cash form | Percentage of deposits banks keep with themselves in the form of cash, gold, or govt. securities |
| Where is it kept? | With RBI | With the bank itself |
| Form of Reserve | Only cash | Cash, gold, or approved securities |
| Purpose | Maintain liquidity and control lending | Ensure liquidity, control inflation and credit growth |
| Returns (Interest) | No interest given by RBI | Banks can earn interest on securities |
| Controlled by | RBI under RBI Act, 1934 | RBI under Banking Regulation Act, 1949 |
| Impact on Liquidity | Reduces liquidity more directly | Reduces lending capacity indirectly |
Easy Trick to Remember:
CRR = Cash with RBI
SLR = Securities & Liquids with bank
CRR = Cash with RBI
SLR = Securities & Liquids with bank
Why important for UPSC?
CRR and SLR are monetary policy tools used by RBI to control inflation, maintain liquidity, and ensure financial stability in the economy.