Hello Grads am Rukmani Today lets know WHAT IS CRR?

CRR STANDS FOR CASH RESERVE RATIO

IT IS THE PORTION OF DEPOSITS WHICH A BANK HAS TO MAINTAINE WITH RBI

RBI USES IT AS A TOOL TO CONTROL THE LENDING ABILITY OF BANKS

HIGHER THE CRR ,LESSER THE BANKS CAN LEND

THIS ENABLES RBI REGULATE LIQUIDITY ,THEREBY INFLATION

CRR IS USED A TOOL TO CONTROL LIQUIDITY IN THE ECONOMY

CRR - Rs.6 INDUSTRIES

CUSTOMER

CAN LEND ONLY Rs.94 /-

DEPOSITS Rs.100/-

RBI

WHEN RBI WANTS TO REDUCE LIQUIDITY

IT INCREASES RATE OF CRR

THIS REDUCES THE LENDING CAPACITY OF BANKS

AS LOAN AVAILABILITY DECREASES LIQUIDITY IN THE ECONOMY ALSO DECREASES

THANK YOU