Cash Reserve Ratio (CRR) Explained: Why RBI Raised the Daily Minimum to 99% but Kept the Rate at 3%

Why would RBI tighten a rule that leaves the CRR rate at 3%? On 9 October 2026 it raised the daily minimum banks must keep from 90% of their CRR requirement to 99%, from the fortnight beginning 16 October. That sounds like a technical change, and partly it is. But it shows how RBI uses the cash reserve ratio to manage how much money is moving through the system. Here is the plain version.

Cash reserve ratio (CRR) explained

The cash reserve ratio is the share of a bank’s deposit base it must keep as cash with RBI. Banks earn no interest on it. RBI’s website lists the CRR at 3.00% and the SLR at 18.00% (Reserve Ratios panel on rbi.org.in). The requirement comes from Section 42(1) of the Reserve Bank of India Act, 1934, which the 9 October circular cites in its title.

The base is the bank’s net demand and time liabilities (NDTL), which is mostly deposits. A bank with NDTL of ₹1,00,000 crore must keep ₹3,000 crore with RBI.

The average and the daily floor

Banks don’t have to hold exactly 3% every day. The circular explains that they are “allowed to maintain minimum Cash Reserve Ratio (CRR) of not less than 90 percent of the required CRR on all days during the reporting fortnight”, provided the fortnight’s average meets the full requirement (RBI/2026-27/290, para 1).

Before the change, a bank could run its RBI balance down by up to ₹300 crore on a busy day and make it up later in the fortnight. From 16 October, that room shrinks to ₹30 crore. RBI’s stated reason is “a review of the current liquidity conditions” (para 2).

How the fortnight average works in practice

The average rule is what gave banks room before. Take the same bank, and a 14-day fortnight where it has to average ₹3,000 crore:

Under the old rule, a bank could swing ₹600 crore between its lean and heavy days. Under the new one, the swing is ₹60 crore. Its RBI balance has to stay almost flat, so any temporary surplus can’t be lent out as freely in the overnight market.

Why CRR costs banks money

CRR balances earn nothing, while surplus funds placed in the SDF earn 5.25%. For our example bank, ₹3,000 crore at 5.25% would be about ₹157.5 crore a year in forgone interest. The daily floor doesn’t change that annual cost, because the average requirement is the same. What it removes is flexibility. Banks will likely hold slightly more cash idle on busy days, or borrow at short notice to stay above 99%. That is our assessment; RBI’s circular gives only the liquidity reason.

CRR vs SLR: two different reserves

People often mix up the two. CRR money sits with RBI as cash, earns nothing, and the bank cannot use it. SLR assets (18% of NDTL) stay on the bank’s own books as cash, gold or approved securities, mostly government bonds, and those bonds do earn interest. The 9 October change touches only the CRR. The SLR level on RBI’s website is unchanged at 18%.

Who the change applies to

The circular is addressed to “All Scheduled Banks”. It covers banks in RBI’s Second Schedule: public and private sector banks, foreign banks, small finance banks and scheduled co-operative banks, among others. The first fortnight under the new floor begins on 16 October, six days from today.

Where CRR sits among RBI’s tools

In the same week RBI also scheduled a ₹2,00,000 crore 3-day variable rate reverse repo (VRRR) auction for 12 October (PR 2026-2027/1304), and a ₹25,000 crore OMO sale for 13 October. A VRRR takes surplus cash from banks for a few days. An OMO sale takes it out for longer, by selling government bonds. The higher daily CRR floor works alongside them: banks have to keep more cash parked every day.

Does it touch your EMI or FD?

Not directly. The CRR rate itself hasn’t changed, and loans linked to an external benchmark move with the repo rate. Indirectly, less spare cash in the system can keep banks’ short-term funding costs high. That is one reason banks may be slow to cut deposit or loan rates after the 7 October repo hike. That is our reading, not an RBI statement. For the direct effect of the repo hike on loans, see our repo hike EMI impact piece. Our October policy coverage explains the decision itself, and the new deposit rules are covered in RBI’s new FD rules.

Four questions people ask about the cash reserve ratio.

FAQ

Has RBI changed the CRR rate?

No. The rate is 3%. Only the minimum daily share changed, from 90% to 99%.

When does the change start?

From the reporting fortnight beginning 16 October 2026.

Is the higher floor permanent?

The circular sets no end date. It links the change to “current liquidity conditions”, so RBI can review it if those conditions change.

Why does a daily floor matter if the average stays at 3%?

Because it decides how much a bank can dip on a busy day. At 99%, the dip is capped at 1% of the requirement, against 10% earlier.

Do banks earn interest on CRR money?

No. That is why CRR is a cost for banks, unlike SDF balances, which earn 5.25%.

Takeaway: the CRR rate is still 3%, but from 16 October banks have far less day-to-day slack. Read it as a sign that RBI wants cash in the system kept tight for now.