The Reserve Bank of India (RBI) has announced a reduction in penal interest rates applicable on shortfalls in Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), following a 25 basis point cut in the Bank Rate.
According to the latest circular RBI/2025-26/134 (DoR.RET.REC.341/12.01.001/2025-26) issued on December 5, 2025, the Bank Rate has been revised downward from 5.75% to 5.50% with immediate effect. This change was announced in the Monetary Policy Statement 2025-26 released earlier in the day.
Since penal interest on reserve requirement shortfalls is directly linked to the Bank Rate, the revised rates now stand as follows:
Revised Penal Interest Rates
| Duration of Shortfall | Existing Rate | Revised Rate |
|---|---|---|
| CRR/SLR shortfall (as per prescribed slabs) | Bank Rate + 3% (8.75%) or Bank Rate + 5% (10.75%) | Bank Rate + 3% (8.50%) or Bank Rate + 5% (10.50%) |
The revised rates take effect immediately for all scheduled banks.
The RBI clarified that all provisions specified in its earlier circular dated June 6, 2025, remain unchanged except for the updated penal interest rates.
With this move, banks facing temporary liquidity mismatches will experience slightly reduced penalties, in line with the central bank's calibrated stance on liquidity and interest rate management.
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