Question

What is mean by CRR? Briefly examine its role in credit control.

Answer 1

CRR [Cash Reserve Ratio]: According to RBI act, each commercial bank has to keep a certain ratio of cash reserves (deposits) with the central bank or RBI. The RBI is empowered to vary this CRR between $3$% to $15$%.
By increasing the CRR, the excess reserve of commercial bank is reduced, which restricts the credit granting capacity of the commercial banks. Similarly, the reduction in CRR, increases the capacity of commercial banks to expand credits.