Cash Reserve Ratio

Shaktikanta Das

Chart

RBI's coronavirus contingency plan: Keep it going  from a secret location

Reserve Bank of India, RBI

Reserve Bank of India (RBI) Governor Shaktikanta Das at the RBI's sixth bi-monthly monetary policy review meeting of 2019-20, in Mumbai (Photo- Kamlesh Pednekar)

Shaktikanta Das, RBI, Reserve Bank of India Governor

colending, nbfcs, banks

banks

An image of RBI headquarters in Mumbai (Photo: Kamlesh Pednekar)

<h4>
	Cash Reserve Ratio</h4>
<div>
	Under cash reserve ratio (CRR), the commercial banks have to hold a certain minimum amount of deposit as reserves with the central bank. The percentage of cash required to be kept in reserves as against the bank&#39;s total deposits, is called the Cash Reserve Ratio. The cash reserve is either stored in the bank&rsquo;s vault or is sent to the RBI. Banks can&rsquo;t lend the CRR money to corporates or individual borrowers, banks can&rsquo;t use that money for investment purposes. And Banks don&rsquo;t earn any interest on that money.</div>

<br />
<h4>
	Why do banks have to reserve cash with RBI?</h4>
<div>
	Since a part of the bank&rsquo;s deposits is with the Reserve Bank of India, it ensures the security of the amount in case of any emergencies. The cash is readily available when customers want their deposits back. At the time of high inflation, the government needs to ensure that excess money is not available in the economy. CRR helps in keeping inflation under control. If there is a threat of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves, effectively reducing the amount of money that is available with the banks. This curbs excess flow of money in the economy.</div>
<div>
	When there is a need to pump funds into the market, the RBI lowers the CRR rate, which in turn, helps the banks provide loans to a large number of businesses and industries for investment purposes. Lower CRR also boosts the growth rate of the economy.</div>

Cash Reserve Ratio (CRR) - Learn all about Cash Reserve Ratio (CRR) or CRR rate is governed by the RBI in India as per the Monetary Policy Committee. CRR of Cash reserve Ratio is a monetary instument which controls the inflation and monetary flow in the economic system of the country.

Page 4 - Latest Updates on Cash Reserve Ratio

RBI pulled out its bazooka to tackle Covid-19 slowdown: Experts on rate cut

Covid-19 relief: RBI cuts repo 75 bps; defers term-loan EMIs for 3 months

Highlights: RBI reduces repo rate by 75 bps to 4.4%; slashes CRR by 100 bps

CRR-exempt loans: Deduction only on incremental lending, clarifies RBI

RBI receives Rs 1.23-trn bid for Rs 25,000-cr long-term repo operations

RBI policy: Repo rate unchanged at 5.15%; FY21 GDP growth projected at 6%

Letter to BS: Time has come to review CRR as credit control instrument

Neither affordable nor relevant

After RBI's CRR spanner, banks can't cut lending rates as much as expected