Cash Reserve Ratio (CRR) is a very important term which all of you should know. Cash Reserve Ratio is a central bank (In India RBI is the Central Bank) regulation that sets the minimum reserves each commercial bank must hold with the RBI (rather than lend out) of customer deposits and notes.
It is normally in the form of cash stored physically in a bank vault (vault cash) or deposits made with a central bank.
CRR is also one of the very important tools used for liquidity control. In India RBI regulates the CRR and increase or decrease it as per the requirements of the economy.