Cash Reserve Ratio
Cash Reserve Ratio (CRR) is the percentage of a bank's total deposits that it must keep in reserve with the Reserve Bank of India (RBI). The current CRR in India is 4.5%. The two main purposes of CRR are: 1. Reserve or Collateral: It acts as a form of collateral when banks borrow money from the RBI. 2. Interest Rate Determination: The RBI uses the CRR to help decide the interest rate for borrowing. These factors are particularly crucial during periods of high inflation, as the RBI can raise interest rates, knowing banks have sufficient collateral in reserve.
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