CRR or Cash Reserve Ratio is, simply put, the portion (expressed as a percent) of depositors' balances banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the U.S. is the Federal Reserve.

A cash reserve ratio (or CRR) is the percentage of bank reserves to deposits and notes. The cash reserve ratio is also known as the cash asset ratio or liquidity ratio. India's central bank ordered commercial banks to hold a larger share of deposits in cash, and raised a key short-term lending rate in a bid to curb high inflation that has stoked fears of overheating. The reserve ratio is sometimes used as a tool in monetary policy, influencing the country's economy, borrowing, and interest rates . However, Central banks rarely alter the reserve requirements due to the fact that it would cause immediate liquidity problems for banks with low excess reserves. Instead, open market operations are used. As of 2006 the required reserve ratio in the United States was 10% on transaction deposits (component of money supply "M1"), and zero on time deposits and all other deposits. An institution that holds reserves in excess of the required amount is said to hold excess reserves. The Reserve Bank of India stipulates the cash reserve ratio — the proportion of deposits that commercial banks must hold in cash to control the availability of money in the market and therby control the inflation.. The RBI also manipulates the repurchase rate, the rate at which it lends to commercial banks in the short term. India's brisk economic expansion — the economy is growing close to 9 percent for the second straight year — has boosted middle-class incomes, but it is also driving up prices with too much money chasing fewer goods. The spike in inflation has triggered concerns that the economy might be overheating and could be headed for a hard landing unless inflation is contained. "In the light of the current macroeconomic, monetary and anticipated liquidity conditions, and with a view to containing inflation expectations, it is critical to take demonstrable and determined action on an urgent basis," .