Full Form of CRR and SLR

The full form of CRR and SLR is Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). It is a compulsory reserve that the Reserve Bank of India (RBI) must maintain. With this, every bank also needs to keep a minimum percentage of the deposit in form of cash with RBI. 

Also, these banks cannot use the cash reserves with RBI for any kind of economic or commercial purpose.

Basically, the apex bank uses CRR as a tool to regulate the liquidity in the economy and control cash flow in the country. Therefore, when RBI wants to increase the cash supply in the economy, it will decrease the CRR rate and vice-versa.

What is SLR?

The SLR stands for Statutory Liquidity Ratio (SLR). It is an obligatory reserve maintained by commercial banks as approved securities based on the specific percentage of net demand and time liabilities. 

Furthermore, the bank also maintains SLR in the liquid assets form. Also, SLR is used as a tool to maintain bank stability by restricting credit facilities given to its customers. 

However, the banks also maintain more SLR and the reason behind this is to keep a certain amount of money in the liquid assets form. This will also be helpful in fulfilling the demand of the depositors immediately.

Difference Between CRR and SLR

To begin with, CRR and SLR are important tools in the economy. Furthermore, they help in minimizing the lending capacity of banks and also take care of the cash flow in the market. 

Moreover, the changes in the inflation and country's growth depend on these two ratios. However, they are also different from each other in various aspects. 

Let's also have a look at the following table to understand the difference between CRR and SLR in a detailed manner.

CRR and SLR- Important Points

Here is the list of important points regarding CRR and SLR given below:

• Firstly, the CRR regulates the liquidity of the country whereas the SLR is responsible for maintaining the credit growth of the country.
• CRR and SLR are also stored in the form of reserves. Thus, the money cannot be used for any investment and lending purposes.
• Next, the RBI also needs to maintain the money supply in the economy. Hence, they use tools, like Reverse Repo Rate, Bank Rate, Repo Rate CRR, and SLR to fulfill these purposes.
• Lastly, the RBI also controls the extreme flow of money in the economy through CRR. On the other hand, SLR is used to fulfill the demand of any depositor by selling the bonds, etc.

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