Question

In banking terminology, CRR means

• A. Credit Reserve Ratio
• B. Cash Reserve Ratio
• C. Credit Rating Ratio
• D. Cash Rating Ratio

Hint:

Think of the "C" in CRR as standing for the physical cash banks must park with the RBI, not credit.

Answer 1

The Correct Option is B

CRR is a short form that shows up often in economics and banking exams, so it helps to break the term itself apart rather than just memorise it.

1. Credit Reserve Ratio: There is no such official term in RBI monetary policy. This option mixes up "credit" with the correct word "cash".
2. Cash Reserve Ratio: This is the real term. Banks in India must set aside a fixed percentage of their deposits as cash reserves with the RBI, and this percentage is the CRR.
3. Credit Rating Ratio: Credit rating is about how trustworthy a borrower is when it comes to repaying debt, worked out by agencies like CRISIL or Moody's. It has nothing to do with reserve requirements.
4. Cash Rating Ratio: This phrase does not exist in banking; it is a distractor built by swapping words around.

Cash Reserve Ratio directly controls how much a bank can lend, since a higher CRR locks away more cash and a lower CRR releases more cash into the system. This makes it a key lever the RBI pulls to control inflation and liquidity.

Let's summarize:

• CRR = Cash Reserve Ratio, a portion of deposits banks must hold with the RBI in cash.
• Raising CRR reduces lendable funds; lowering CRR increases them.

So the correct expansion of CRR is Cash Reserve Ratio, option (B).