Concept:The Cash Reserve Ratio (CRR) is the portion of a bank's total deposits (Net Demand and Time Liabilities) that it must keep as a deposit with the central bank (RBI).
Explanation:CRR is a monetary policy tool used by the RBI to control money supply and inflation.
Banks cannot use this amount for lending or investment; it is held only as a balance with the RBI.
When inflation is high, the RBI increases CRR to reduce the funds available for banks to lend, thus slowing down economic activity.
The current CRR rate (as of May 2020) is 3.00% of NDTL.
This regulation is under the authority of the central bank (RBI), which handles monetary policy, not fiscal policy (managed by the Ministry of Finance).
Comparing the options: Option A describes SLR (Statutory Liquidity Ratio), not CRR.
Option B correctly states that CRR is the share of NDTL held as balances with the RBI.
Option C is vague and incorrect because CRR is not part of the bank's own cash reserves held in vaults—it is a deposit with RBI.
Option D incorrectly defines CRR as a ratio of cash holding to reserves.
Answer:Option B – the share of Net Demand and Time Liabilities that banks have to hold as balances with the RBI.