Business Standard
What is Cash Reserve Ratio (CRR)?

Cash Reserve Ratio

About Cash Reserve Ratio

What is Cash Reserve Ratio (CRR)?

Cash Reserve Ratio

Under cash reserve ratio (CRR), the commercial banks have to hold a certain minimum amount of deposit as reserves with the central bank. The percentage of cash required to be kept in reserves as against the bank's total deposits, is called the Cash Reserve Ratio. The cash reserve is either stored in the bank’s vault or is sent to the RBI. Banks can’t lend the CRR money to corporates or individual borrowers, banks can’t use that money for investment purposes. And Banks don’t earn any interest on that money.

Why do banks have to reserve cash with RBI?

Since a part of the bank’s deposits is with the Reserve Bank of India, it ensures the security of the amount in case of any emergencies. The cash is readily available when customers want their deposits back. At the time of high inflation, the government needs to ensure that excess money is not available in the economy. CRR helps in keeping inflation under control. If there is a threat of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves, effectively reducing the amount of money that is available with the banks. This curbs excess flow of money in the economy.
When there is a need to pump funds into the market, the RBI lowers the CRR rate, which in turn, helps the banks provide loans to a large number of businesses and industries for investment purposes. Lower CRR also boosts the growth rate of the economy.

Latest Updates on Cash Reserve Ratio

SBI raises Rs 10,000 crore at a coupon of 7.36% in 15-year infra bonds

Several other state-owned lenders such as Canara Bank and Bank of India are also planning to raise funds through infrastructure bonds

Updated On : 10 Jul 2024 | 9:46 PM IST

Lenders seek better terms to increase green and sustainable financing

According to current norms, for Rs 10,000 crore of loans, banks have to ensure Rs 4,000 crore of priority sector lending target

Updated On : 14 Jun 2024 | 11:43 PM IST

Many faces of OMO

The OMO sale is quite an innovative way to address the concerns around currency

Updated On : 22 Oct 2023 | 7:05 PM IST

Banking liquidity remains in deficit after I-CRR disbursement's 2nd tranche

RBI had decided on September 8 to discontinue the I-CRR by October 7, in a phased manner

Updated On : 25 Sep 2023 | 7:39 PM IST

Advance tax payments push the banking system liquidity into deficit

"The estimates are that around Rs 90,000 crore to Rs 1 trillion will go out as goods and services tax (GST) outflow," a dealer at a primary dealership said

Updated On : 18 Sep 2023 | 11:43 PM IST

Lenders likely to hike deposit rates up to 25 bps this festival season

Only those with asset-liability management mismatch would consider upward rate revisions

Updated On : 11 Sep 2023 | 9:36 PM IST

Overnight index swap rates at 10-month high; government bond yields rise

One-year swap rate has jumped 13 bps so far in September, whereas the five-year swap rate has jumped 19 bps

Updated On : 11 Sep 2023 | 9:32 PM IST

India's OIS rates hit nine-month high, government bond yields rise

The one-year swap rate hit 7.10 per cent on Monday, the highest level since March 9, while the five-year swap rate rose to 6.85 per cent, a level last seen on November 9, 2022

Updated On : 11 Sep 2023 | 7:34 PM IST

RBI decides to withdraw incremental CRR by Oct 7 in phased manner

Net impact of incremental CRR was estimated to be little more than Rs 1 trn

Updated On : 08 Sep 2023 | 9:26 PM IST

RBI to discontinue incremental cash reserve ratio in a phased manner

The amounts impounded under the I-CRR will be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly fashion

Updated On : 08 Sep 2023 | 3:04 PM IST

India bond yields end flat as all eyes on RBI's I-CRR review this week

The I-CRR could be reduced to 5%-8% in a phased manner from the current 10%, treasury officials have said

Updated On : 06 Sep 2023 | 10:35 PM IST

RBI may extend incremental cash reserve ratio with tweaks: Bankers

"The I-CRR is acting as an indirect rate hike and, at best, the RBI could lower the limit taking into consideration tax outflows," a senior treasury official at a private bank said

Updated On : 06 Sep 2023 | 11:03 AM IST

Maruti Suzuki to invest Rs 45,000 crore to double capacity in 8 years

Targets 4 mn annual output; new CFO to take charge on Jan 1

Updated On : 29 Aug 2023 | 11:25 PM IST

Short-term govt bond rates harden after incremental CRR guidelines

The yield on the one-year and two-year government bonds has edged up 8 basis points and 4 basis points respectively since August 10

Updated On : 21 Aug 2023 | 11:32 PM IST

10% incremental CRR temporary, will drain out Rs 1 trn from system: RBI

Short-term rates on money market instruments like call money rates, treasury bills and commercial paper are likely to increase by 15-20 bps in the near term: ICRA

Updated On : 10 Aug 2023 | 2:17 PM IST

Incremental CRR move to help suck out Rs 1 trn of excess liquidity: Das

While announcing the move, Das had said the return of Rs 2,000 notes since May 19 this year, has led to instances of excess liquidity for which the move was being introduced

Updated On : 10 Aug 2023 | 1:40 PM IST

Incremental CRR to suck out liquidity of over Rs 1 trn: RBI governor Das

During the RBI MPC announcement, Shaktikanta Das had said that I-CRR is intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banks

Updated On : 10 Aug 2023 | 1:18 PM IST

Banks to maintain 10% additional CRR from Aug 12 as temporary measure: RBI

Action is part of central bank's efforts to reduce surplus liquidity, it says after monetary policy announcement

Updated On : 10 Aug 2023 | 11:45 AM IST

Banks want CRR, SLR, priority sector exemption for sovereign green bonds

Suggest green masala bond to attract foreign investors

Updated On : 13 Jan 2023 | 9:30 AM IST

RBI imposes penalty of Rs 13.9 lakh on Mynd Solutions for non-compliance

Non-promoter shareholding in the company exceeded the 10% ceiling prescribed for TReDS operators

Updated On : 29 Dec 2022 | 5:55 PM IST