What is meant by legal reserve requirements?

Legal Reserve Requirements (LRR) refer to the minimum percentage of total deposits (time deposits and demand deposits), required to be kept by the commercial banks with themselves and with the central bank.

It has two components

1. Cash Reserve Ratio (CRR)
2. Statutory Liquidity Ratio (SLR)

Additional Information:-

Cash Reserve Ratio (CRR):- It refers to the minimum percentage of net demand and time deposits, to be kept by commercial banks with the central bank.

Statutory Liquidity Ratio (SLR):- It refers to the minimum percentage of net demand and time deposits that commercial banks are required to maintain themselves.