CRR and SLR

Cash reserve Ratio (CRR) is the amount of Cash(liquid cash like gold) that the banks have to keep with the Central Bank. This Ratio is basically to secure solvency of the banks and to drain out the excessive money from the banks. If the Central Bank decides to increase the percent of this, the available amount with the banks comes down and if it reduces the CRR, then the available amount with Banks increased and they will be able to lend more.

Statutory Liquidity Ratio(SLR) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the Central Bank(Federal Bank in US and RBI in India) in order to control the expansion of bank credit.