---
title: "Cash Reserve Ratio Definition and Importance"
description: "The Cash Reserve Ratio is the minimum percentage of a bank's liabilities that must be held as cash with the RBI, crucial for monetary policy."
url: "https://modeldiplomat.com/learn/glossary/cash-reserve-ratio"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The Cash Reserve Ratio is the minimum percentage of a bank's net demand and time liabilities that it must keep as cash reserves with the Reserve Bank of India.
- What is the statutory basis of the Cash Reserve Ratio?
- How does CRR differ from the Statutory Liquidity Ratio (SLR)?
- Does the RBI pay interest on CRR balances?
- How does raising CRR affect the economy?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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In March 2020, the Reserve Bank of India cut the Cash Reserve Ratio from 4% to 3% to inject roughly ₹1.37 lakh crore of liquidity into the banking system amid the COVID-19 economic disruption.

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