CRR – Cash Reserve Ratio
CRR refers to the liquid cash that banks have to maintain with the Reserve Bank of India (RBI) as a certain percentage of their demand and time liabilities.
OR Simply we can say
It is the amount of funds that the banks have to keep with RBI.
RBI uses CRR either to drain excess liquidity or to release funds needed for the growth of the economy from time to time. It is basically a ratio used to secure solvency of the bank. Central banks increase CRR only if it feels there is a lot of liquidity in the market and purchasing power of people is more than required.
Leave a Reply