Reserve Requirement Ratio (RRR)

From The Free Forex Encyclopedia

Jump to: navigation, search

The reserve requirement ratio (RRR) or cash reserve ratio (CRR) is the percentage of customer deposits and other liquid assets that commercial banks must store, within it's own institution or with the central bank.

The RRR is set by the central bank to ensure that commercial banks have enough assets to pay its depositors in case of unusually high withdrawals.

Some central banks use RRRs for monetary policy. Decreasing the RRR tends to stimulate economic activity as banks have more assets to loan out to borrowers.

Alternatively, increasing the RRR decreases the money available to potential borrowers, which could lead to a decline in economic activity and higher purchasing power of the money circulating in markets.

Related Articles

The People's Bank of China Strikes Again!

China's Dynamic RRR: What's That All About?

Why China's RRR Cut Might Not Work

China Cuts It's RRR for the First Time in Three Months?

"I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times."
Bruce Lee
Clicky Web Analytics