1. What is Cash Reserve Ratio?

Cash Reserve Ratio (CRR) is the percentage of a bank's net demand and time liabilities that must be maintained as cash reserves with the central bank. It is a key monetary policy tool used by central banks to control money supply in the economy.

2. How Does the Calculator Work?

The calculator uses the CRR formula:

Where:

• \( CR \) — Cash Reserves (amount held with central bank)
• \( NDTL \) — Net Demand & Time Liabilities

Explanation: The formula calculates the percentage of total deposits that banks are required to keep as cash reserves with the central bank.

3. Importance of CRR Calculation

Details: CRR is crucial for maintaining banking system stability, controlling inflation, and regulating money supply. It ensures banks have sufficient liquidity to meet withdrawal demands.

4. Using the Calculator

Tips: Enter cash reserves and net demand & time liabilities in the same currency units. Both values must be positive, with NDTL greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is the purpose of CRR?
A: CRR helps central banks control money supply, manage inflation, and ensure banking system stability by mandating minimum cash reserves.

Q2: How often is CRR calculated?
A: Banks typically calculate CRR on a daily basis based on their net demand and time liabilities.

Q3: What happens if a bank fails to maintain CRR?
A: Banks failing to maintain required CRR may face penalties from the central bank, including interest charges on the shortfall.

Q4: How does CRR affect bank lending?
A: Higher CRR reduces the amount of money available for banks to lend, while lower CRR increases lending capacity.

Q5: Is CRR the same for all banks?
A: CRR is typically set uniformly for all commercial banks by the central bank, though some jurisdictions may have differential rates.