CRR Full Form is Cash Reserve Ratio. Commercial banks are required to keep a fixed portion of the total amount of money (in the form of deposits) with the Reserve Bank. It occurs in a fixed percentage or ratio. The percentage or ratio of this portion (of total deposits) held by the commercial banks with the Reserve Bank is called the Cash Reserve Ratio or CRR.
These deposits are deposited in the current account of the banks with the Reserve Bank. The Reserve Bank, like a normal current account, does not pay any interest on this deposit to commercial banks.
Commercial banks do not have the right to use this amount with the Reserve Bank. That is, this money cannot be used for any kind of economic or commercial activities.
Example
You have a deposit of 1 lakh rupees with a bank. Assuming that the rule of 6 percent CRR is in force at this time. That is, your deposit of 1 lakh rupees is with the bank, 6 percent of that means that 6000 rupees will have to be kept with the Reserve Bank.
The remaining 94000 rupees from your deposit with your bank, he can use it for business activities, lending or investment, etc.
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