CRR is the percentage amount of deposits (time and demand liabilities) of a bank, that it has to maintain with the RBI. As the CRR rises, the amount available for lending decreases.
Meanwhile RBI announced its intention to hike the Cash Reserve Ratio by 50 basis points to 5.5% in two stages. CRR is RBI's most preferred tool to control liquidity in the system. CRR hike will be effective from December 23rd and January 6th. This move will put upward pressure on the interest rates.
Answered by
subu
at
10:39 AM on December 11, 2007