Last week RBI has increased the CRR rates by 0.75. If you are not aware of what is CRR, this article will provide you basic idea on how the CRR will impact the finance market.
Every bank in India has to maintain the some portion of money with the Reserve Bank of India(RBI). If the percentage of CRR is increased, banks will be parking more money to RBI. It leads to less liquidity with the banks, results in tightening the monetary policy. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.
Subscribe to our future articles here.