What is the Full form of CRR?
The CRR full form is the Cash Reserve Ratio. CRR reflects the amount of cash that RBI (Reserve Bank of India) banks are required to maintain on hand. It is a proportion of a bank’s total cash reserves. CRR tends to fluctuate from period to period. The CRR is determined by the RBI, and banks are required to keep a specific proportion of RBI deposits.
Read Other Full Forms
The Reserve Bank of India (RBI) requires banks to hold a certain percentage of their deposits in cash so that they can be delivered to bank customers when necessary. The Cash Reserve Ratio (CRR) is the proportion of required cash reserves. They may place the cash in a bank vault or send it to RBI.
How is CRR determined?
- When the CRR rate is 4%, a bank must hold 4% of its entire NDTL (Net Demand and Time Liabilities) in cash.
- The bank is unable to lend or invest the funds.
CRR aims
The CRR has two primary goals, which are
- Since a percentage of the bank’s deposits are held by RBI, the security of the funds is guaranteed. It makes the money or deposits quickly accessible to clients who desire a refund.
CRR assists with cost management on the track. During periods of significant economic inflation, the Reserve Bank of India (RBI) raises the Cash Reserve Ratio (CRR), requiring banks to hold larger reserves and restricting their ability to begin lending.
