Objectives of the Cash Reserve Ratio
The objectives of implementing the Cash Reserve Ratio (CRR) are as follows:
- The CRR helps keep inflation under control. The RBI can increase the CRR to discourage banks from making more loans when there is a risk of inflation.
- Even during periods of strong demand, CRR guarantees that banks maintain a certain amount of money accessible to consumers.
- The reference rate for the loan is the CRR. Lending rates cannot be lowered by banks from their base lending rate.
- Because the CRR controls the amount of money in circulation, it can contribute to boosting the economy.
Cash Reserve Ratio (CRR) – Meaning, Objective, Significance, & Effect
Get to know About Cash Reserve Ratio: CRR (Objective, Significance, Effect): The Reserve Bank of India (RBI) is in charge of supervising banking operations in India and implements various measures to manage money circulation in connection with the economic scenario. One of the important tools of the RBI’s monetary policy is the cash reserve ratio or CRR. All commercial banks need to abide by the guidelines regarding CRR as devised by the RBI.
In this article, we will discuss in detail the cash reserve ratio (CRR), including its definition and justification. Also, find out its objectives, significance, and how it is calculated.
Table of Content
- What is the Cash Reserve Ratio?
- Why Do Banks Need to Maintain Cash Reserve Ratio?
- Objectives of the Cash Reserve Ratio
- Significance of the Cash Reserve Ratio
- How is the Cash reserve ratio calculated?
- Effect of the Cash Reserve Ratio
- What is the Cash Reserve Ratio Changed Regularly?