Reserve Requirement Ratio

The Reserve Requirement Ratio (RRR) is the percentage of a commercial bank’s deposits that it must keep as reserves, either in its vault or with the central bank, and not lend out. It serves as a safeguard to ensure banks maintain enough funds to meet customer withdrawals and stabilize the financial system. By adjusting the RRR, central banks can influence how much money banks can lend, thereby helping control inflation, manage economic growth, and maintain financial stability.