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Cash Reserve Ratio

About Cash Reserve Ratio

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What is Cash Reserve Ratio (CRR)?

Cash Reserve Ratio

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's total deposits, is called the Cash Reserve Ratio. The cash reserve is either stored in the bank’s vault or is sent to the RBI. Banks can’t lend the CRR money to corporates or individual borrowers, banks can’t use that money for investment purposes. And Banks don’t earn any interest on that money.

Why do banks have to reserve cash with RBI?

Since a part of the bank’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.
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.

Latest Updates on Cash Reserve Ratio

Suggest green masala bond to attract foreign investors

Updated On: 13 Jan 2023 | 9:30 AM IST

Non-promoter shareholding in the company exceeded the 10% ceiling prescribed for TReDS operators

Updated On: 29 Dec 2022 | 5:55 PM IST

The base issue size for ICICI Bank's infra bonds was Rs 1,000 crore with green shoe option of Rs 4,000 crore

Updated On: 08 Dec 2022 | 10:49 PM IST

10-year paper priced at 7.51%, or about 17 bps above benchmark g-sec yield

Updated On: 02 Dec 2022 | 11:55 PM IST

The planned issuance worth Rs 10,000 crore includes a greenshoe option of Rs 5,000 crore, the bank said

Updated On: 24 Nov 2022 | 10:34 PM IST

The fall in the liquidity surplus is owing to multiple factors, including the RBI's interventions in the forex market and a sharp pick-up in bank credit growth, which is currently at nine-year highs

Updated On: 30 Sep 2022 | 11:01 PM IST

Proceeds to be used for project financing, affordable housing

Updated On: 05 Sep 2022 | 12:42 AM IST

The RBI announced five measures on July 6 to further liberalise foreign exchange. The measures are aimed at creating a more enabling environment to attract dollars through banking deposits, ECB, FPI

Updated On: 13 Jul 2022 | 10:26 PM IST

According to SBI's website, the interest rate on US dollar category deposits with maturities up to 2 and 3 years are up by 85 basis points to 2.85 per cent and 3 per cent

Updated On: 12 Jul 2022 | 11:15 PM IST

The Reserve Bank of India (RBI) hiked the benchmark interest rate, or repo rate, in May and then in June to control demand and liquidity in the economy, bringing CPI down

Updated On: 12 Jul 2022 | 4:47 PM IST

RBI announced five measures pertaining to the liberalisation of foreign exchange flows into India

Updated On: 07 Jul 2022 | 12:56 AM IST

Investors should be prepared for further turmoil

Updated On: 12 Jun 2022 | 10:25 PM IST

During the gradual transition to a neutral stance, maybe over the next couple of months, liquidity management will play an important role in transitioning the WACR closer to the repo rate

Updated On: 09 Jun 2022 | 3:17 AM IST

Risks for growth and asset prices have increased

Updated On: 08 Jun 2022 | 10:16 PM IST

The Governor's reminder that the repo rate is still below the pre-pandemic level served as a clear signal that more rate hikes lie ahead

Updated On: 08 Jun 2022 | 1:02 PM IST

The yield jumped 4 basis points (bps) on Monday after Saudi Arabia - the world's biggest oil exporter - raised prices for Asian buyers

Updated On: 07 Jun 2022 | 12:45 AM IST

The central bank will likely revise its inflation estimate to 6.2-6.5 per cent, which is way above the upper end of its tolerance band of 2-6 per cent, the economists at Barclays said

Updated On: 26 May 2022 | 11:40 PM IST

In a Q&A, Srinivasan Vaidyanathan says the lender expects to reduce employee turnover at the junior level with the introduction of RSUs

Updated On: 24 May 2022 | 10:17 PM IST

The yield on the 10-year benchmark government bond fell almost 9 bps to end the day at 7.21 per cent

Updated On: 12 May 2022 | 1:24 AM IST

RBI has been slow in withdrawing accommodation

Updated On: 04 May 2022 | 10:16 PM IST