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Cash Reserve Ratio (CRR)

Cash reserve ratio denotes the reserve which every banking company should maintain a specified minimum fraction of the total deposits of customers (time liabilities and demand liabilities) either in cash or as deposits with the central bank or its agent or cash stored physically in the bank vault.The amount specified as the CRR is held in cash and cash equivalents.

The central bank of a country gives the guidelines about CRR. By CRR, here is to ensure that banks do not run out of cash to meet the payment demands of their depositors. CRR is a crucial monetary policy tool and is used for controlling money supply in an economy.

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