If the Cash Reserve Ratio is lowered by the RBI, supply of money in the economy will :

The Cash Reserve Ratio (CRR) is a monetary policy tool used by the RBI to regulate liquidity and money supply [4]. It represents the percentage of deposits that banks must maintain as cash with the RBI, which cannot be used for lending [2]. When the RBI lowers the CRR, banks are required to park less money with the central bank, thereby freeing up more funds for lending and investment. This reduction increases the money multiplier, which is mathematically defined as the inverse of the reserve ratio (1/CRR). A higher money multiplier allows the banking system to create more credit from the same monetary base, leading to an expansion of the overall money supply in the economy [1][3]. Consequently, lowering the CRR enhances liquidity and stimulates economic activity by increasing the availability of credit [2].

Sources

1. [4] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > CASH RESERVE RATIO (CRR) vs STATUTORY LIQUIDITY RATIO (SLR) > p. 169
2. [2] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Cash Reserve Ratio (CRR) = Percentage of deposits which a bank must keep as cash reserves with the bank. > p. 40
3. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.12 Money Creation > p. 59
4. [3] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Cash Reserve Ratio (CRR) = Percentage of deposits which a bank must keep as cash reserves with the bank. > p. 42