The cash reserve ratio is an essential part of a bank. The cash reserve ratio is a specific part of the Reserve Bank of India (RBI). CRR is the way that the banks ensure that they never run out of money. The cash reserve ratio is the way that you can calculate the money multiplier. Under the policy of the cash reserve ratio (CRR), the commercial banks have to keep certain amounts as reserves with the Reserve Bank of India. The percentage of reserve which is required to be kept will be against the bank’s total deposits. The banks can choose where they want to keep the cash reserve ratio, as they can keep it in two places. Firstly, in the bank’s vault or they can send it to the Reserve Bank of India. A bank cannot lend the cash which is kept as reserve to individual borrowers. Additionally, a bank cannot use the reserve for making any investments.