Cash Reserve Ratio (CRR)
Definition
The minimum percentage of a commercial bank's total deposits that must be maintained as cash reserves with the RBI. An increase in CRR reduces the funds available with banks for lending, contracting money supply.
Example
"If CRR is 4% and a bank has deposits of ₹1,000 Crore, it must keep ₹40 Crore with RBI. If RBI raises CRR to 5%, the bank must keep ₹50 Crore, leaving ₹10 Crore less for lending."