Paying interest on CRR balances

It is generally believed that both the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) are monetary tools in the hands of Reserve Bank of India. SLR, in fact, is not a tool to regulate the liquidity in the system. Interest on CRR itself can be used as a monetary tool to effectively regulate the money supply in the system.
SLR investments are made in government bonds, which will come back to the system as and when the government spends the money mobilised through issuing

monetary tools, SLR, RBI, CRR, interest on CRR, Reserve Bank of India