The Cash Reserve Ratio (CRR) is the percentage of a bank's total deposits that it needs to maintain as liquid cash, as mandated by the Reserve Bank of India (RBI)
. This requirement ensures that banks have enough funds to meet customers' requirements even during high withdrawals and helps the RBI regulate the money supply in the economy
. When the CRR increases, banks need to hold a higher proportion of their deposits in reserve, reducing the amount of money available for lending, which can slow down economic growth. Conversely, when the CRR lowers, banks have more funds available to lend, potentially stimulating economic growth
. The CRR is calculated as a percentage of the bank’s Net Demand and Time Liabilities (NDTL)
. The RBI can adjust the CRR to control inflation, manage liquidity, and stimulate economic growth
. As of now, the CRR is 4.5%
