Question

Define or Explain the following concepts.
Cash Reserve Ratio

Answer 1

Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must have keep as cash reserves with the central bank in the form of cash. Cash reserve ratio is determined by central bank so that they can use it as a quantitative instrument to control the amount of credit creation of the commercial banks at the time of inflation or deflation in the economy.