Cash Reserve Ratio (CRR)
Cash Reserve Ratio (CRR) is a tool used by the central bank of a country to control the amount of money that commercial banks can lend. It is a percentage of the total deposits that banks must keep with the central bank. By increasing or decreasing the CRR, the central bank can control the amount of money that banks can lend. This, in turn, affects the money supply in the economy and helps the central bank to control inflation.
History of Cash Reserve Ratio
The concept of Cash Reserve Ratio was first introduced in India in 1962. It was part of the Reserve Bank of India Act, 1934. The purpose of introducing the CRR was to ensure that the commercial banks maintain a certain level of liquidity in the economy. The CRR was initially set at 3.5% and has been changed several times since then. In the year 2020, the CRR was reduced to 3%.
Comparison of Cash Reserve Ratio
| Country | CRR (%) |
|---|---|
| India | 3.00 |
| USA | 10.00 |
| UK | 0.00 |
| China | 17.00 |
Summary
Cash Reserve Ratio (CRR) is an important tool used by the central bank of a country to control the amount of money that commercial banks can lend. It is a percentage of the total deposits that banks must keep with the central bank. By increasing or decreasing the CRR, the central bank can control the amount of money that banks can lend. This, in turn, affects the money supply in the economy and helps the central bank to control inflation. For more information about Cash Reserve Ratio, you can visit websites such as the Reserve Bank of India, the Federal Reserve Bank of the United States, and the Bank of England.
See Also
- Statutory Liquidity Ratio (SLR)
- Repo Rate
- Reverse Repo Rate
- Marginal Standing Facility (MSF)
- Bank Rate
- Open Market Operations (OMO)
- Liquidity Adjustment Facility (LAF)
- Base Rate
- Marginal Cost of Funds Based Lending Rate (MCLR)
- Prime Lending Rate (PLR)
