BANKING AFFAIRS

Detailed explanation-1: -The Cash Reserve Ratio (CRR) refers to the share of Net Demand and Time Liabilities that banks have to hold as balances with the RBI. The objective of CRR is to keep inflation under control. During high inflation in the economy, the central bank raises the CRR to lower the bank’s loanable funds.

Detailed explanation-2: -Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash. In other words it is the proportion of cash which the commercial have to deposit to the Reserve Bank of India(RBI) which is the central bank in India.

Detailed explanation-3: -All Scheduled Commercial Banks are at present required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) of 5.00 per cent of the Net Demand and Time Liabilities (NDTL) (excluding liabilities subject to zero CRR prescriptions) under Section 42(1) of the Reserve Bank of India Act, 1934.

Detailed explanation-4: -For the purpose of maintaining CRR, every scheduled bank is required to maintain a Principal Account with the Deposit Accounts Department (DAD) of the Reserve Bank of India at the centre where the principal office of the bank is located.