SSC CHSL Model Paper 19

Cash Reserve Ratio (CRR) is the percentage of cash deposits that banks need to keep with the Reserve Bank of India on a fortnightly basis. Increasing the CRR also means banks have lesser money to lend. In the absence of enough liquidity in the financial system, banks have to increase their lending rates to decrease the demand for money. On the other hand, a cut in CRR infuses more liquidity in the market and banks are pressurized to lend these funds. The lending interest rates to increase the demand for money.