What is Cash Reserve Ratio (CRR):
Cash Reserve Ratio (CRR) is the most frequently used term specially in banking sector in India. It is normally the portion of deposits in the form of cash that the banks have to maintain with the Central Bank (i.e. The Reserve Bank of India). In other words, Cash Reserve Ratio (CRR) is the regulation of Central Bank which ensures, every bank must hold the minimum reserve to meet with the monetary stability in the country. That is why, it is also known as the Reserve Requirement. The Reserve Bank of India (RBI) generally, uses CRR as tool to control liquidity in the banking system. With increase in CRR, the RBI controls the excess lendable amount available with banks, thereby controlling Inflation.
