The Cash Reserve Ratio refers to

The Cash Reserve Ratio (CRR) is a monetary policy tool mandated under Section 42(1) of the RBI Act, 1934 [1]. It represents the specific percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be maintained as cash balances with the Reserve Bank of India (RBI) [1]. Unlike the Statutory Liquidity Ratio (SLR), which banks hold themselves in liquid assets like gold or government securities, CRR must be kept exclusively with the RBI and does not earn interest for the banks [1]. The NDTL includes demand deposits (savings and current accounts) and time deposits (fixed deposits). By adjusting this ratio, the RBI regulates liquidity and credit expansion in the economy; a higher CRR reduces the funds available for lending, thereby controlling inflation.

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > The following are the major instruments/tools that RBI uses for conducting its monetary policy: > p. 63