:Cash Reserve Ratio (CRR) is a specified minimum fraction of bank deposits which banks are required to keep with RBI in the form of reserves or balances. It is the share of net demand and time liabilities that banks must maintain as cash balance with the RBI.
The objective 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.
CRR specifications give greater control to the central bank over money supply. Commercial banks have to hold only some specified part of the total deposits as reserves.