admin

Cash Reserve Ratio
 

  • Banks1 need to maintain a certain percentage of their Net Demand and Time Liability (NDTL)2 as cash with the RBI which is known as cash reserve ratio (CRR).
  • CRR for banks are prescribed and regulated by RBI.
  • Banks are required to maintain CRR prescribed by the RBI on an average daily basis during a reporting fortnight, with a minimum of 99%3 of the required CRR on a daily basis.
  • For the purpose of maintaining CRR, banks maintain a principal account with the Deposit Accounts Department (DAD) of the Reserve Bank at the centre where the principal office of the bank is located.

 
CRR snap shot
 

  • Chart below shows CRR trend over the years.

 
CRR trend over the years
 

  • As seen from chart above, current CRR is lowest since 1976.
  • Highest CRR has been 15%.
  • Chart below shows daily CRR maintained by banks with RBI and average daily CRR required to be maintained by banks with RBI.

 
CRR maintained by Banks
 

  • It can be observed from above that banks generally maintain higher cash reserves with RBI.

 

To read more, Download PDF