Give reasons "The CRR affects the lending capacity of the banks".
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The Cash Reserve Ratio (CRR) denotes amount or fund that banks need to keep up with the Reserve Bank of India (RBI) regularly.
If the CRR of a bank is more than the required fund, then the respective can lend more money according to their norms.
On the other hand, if the CRR is less, then it affects the lending capacity of the bank.
Business banks are required to keep up normal CRR with the RBI, the measure of which will not be under 3% of the aggregate of Net Demand and Time Liabilities (NDTL) on a fortnightly premise.
The RBI is enabled to build the CRR to ≤20% of the NDTL.
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