Penal Interest On Shortfall In CRR And SLR Requirements-Change In Bank Rate

The Reserve Bank of India (RBI) has recently released an official circular on April 9, 2025, addressed to all its affiliated banks with the subject of “Penal Interest on shortfall in CRR and SLR requirements- Change in Bank Rate.” The circular relates to the changes made in the penal interest rates applicable for shortfalls in the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements. These are compulsory and minimum reserves that commercial banks must maintain with the RBI and in approved securities, respectively. If banks are unable to fulfil these needs, it leads to penalties, usually calculated as a percentage over the RBI’s Bank Rate.

The circular discusses about the previous directions issued under the “Master Direction on CRR and SLR” (2021) and a related circular from February 2025. It mentions the following RBI’s Monetary Policy Statement for 2025–26: the Bank Rate has been reduced by 25 basis points (0.25%), changing it from 6.50% to 6.25%, effective immediately.

As a result of this reduction, the penal interest rates linked to the Bank Rate have also been revised. The penalties that banks must pay for not maintaining the set CRR or SLR levels will now be calculated as follows:

This amendment ensures that the penalty rates stay in line with changes to the Bank Rate, which is a key interest rate used by the RBI to manage liquidity and inflation in the country’s economic condition.

The notice is signed by Latha Vishwanath, Chief General Manager at the RBI.

Refer to the official circular for more related information.