Cash Reserve Ratio (CRR) is a bank regulation that sets the minimum reserves each bank must hold from customer deposits and notes. These reserves are meant to satisfy cash withdrawal demands. CRR is used as a monetary policy tool to influence money supply, borrowing, interest rates, and the economy - with higher CRR requirements restricting money supply expansion and lower CRR expanding money supply. For example, with a 10% CRR, a Rs. 100 deposit allows Rs. 90 in loans, expanding the money supply to Rs. 1000, while a 20% CRR only allows Rs. 80 in loans, expanding the money supply to Rs. 500. Therefore, central banks raise CRR to control inflation from excessive spending and lower it

7. Hope you have now understood the concept of Cash Reserve Ratio. In case of any query please email to hmasurkar@tataamc.com