When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean?

1. The Cash Reserve Ratio (CRR) is the percentage of a bank's total deposits that it needs to maintain as liquid cash with the Reserve Bank of India (RBI). 2. When the RBI announces an increase of the Cash Reserve Ratio, commercial banks are required to hold a larger portion of their deposits as reserves with the RBI. 3. This reduces the amount of funds available with the commercial banks that they can use for lending purposes. 4. Therefore, an increase in CRR means the commercial banks will have less money to lend.