Banking Awareness Study Material
Cash Reserve Ratio (CRR)
- What is CRR?
- Which organization determines CRR?
Cash Reserve Ratio (CRR) is fixed by the Reserve Bank of India (RBI). The current rate can be seen by visiting the home page of RBI's website.
- What happens when CRR is increased and decreased?
The RBI controls the money supply in the market through Cash Reserve Ratio. So if the RBI increases CRR, then the banks will have less money with them to do business with. And if the CRR is decreased by the RBI then the banks will have more money with them to do business with.
Cash Reserve Ratio (CRR) is the amount of funds that all Scheduled Commercial Banks (SCB) excluding Regional Rural Banks (RRB) are required to maintain without any floor or ceiling rate with RBI with reference to their total net Demand and Time Liabilities (DTL) to ensure the liquidity and solvency of Banks.
It means if a bank has a total of Rs 100(say) and the CRR is 4.00%, then the bank has to give 4% of Rs. 100 i.e. Rs. 4 to the RBI. This money is kept with the RBI.
It means if a bank has a total of Rs 100(say) and the CRR is 4.00%, then the bank has to give 4% of Rs. 100 i.e. Rs. 4 to the RBI. This money is kept with the RBI.
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