Cash Reserve Ratio (CRR) is a bank regulation that sets the minimum reserves each bank must hold from customer deposits and notes. These reserves are meant to satisfy cash withdrawal demands. CRR is used as a monetary policy tool to influence money supply, borrowing, interest rates, and the economy - with higher CRR requirements restricting money supply expansion and lower CRR expanding money supply. For example, with a 10% CRR, a Rs. 100 deposit allows Rs. 90 in loans, expanding the money supply to Rs. 1000, while a 20% CRR only allows Rs. 80 in loans, expanding the money supply to Rs. 500. Therefore, central banks raise CRR to control inflation from excessive spending and lower it
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