Question
When the Reserve Bank of India announces an increase of
the Cash Reserve Rate, what does it mean?Solution
CRR or the Cash Reserve Ratio is that ratio of the total deposits held by a bank which it has to keep with the central bank of country. CRR refers to the percentage of deposits banks have to keep as reserve (in cash). This reserve sum is not available for banks for lending and thus if the CRR increases, banks will have less money to lend.
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