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Monday, April 7, 2014

What is Cash Reserve Ratio (CRR)?

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This is the percentage of cash deposits that banks have to maintain with RBI. An increase in CRR means that banks have to park more money with the central bank and, hence, a higher CRR sucks out liquidity from the banking system. It again increases the cost of funds for the banks and results in higher interest outgo for the customer. In 2008, RBI slashed CRR frequently to infuse liquidity into the financial system and rates slipped due to excess liquidity. At present, CRR stands at six per cent

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