The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country's central bank, which in the United States is the Federal Reserve. It is also known as the cash reserve ratio.

The RRR is set by the central bank to ensure that commercial banks have enough assets to pay its depositors in case of unusually high withdrawals.

Some central banks use RRRs for monetary policy. Decreasing the RRR tends to stimulate economic activity as banks have more assets to loan out to borrowers.

Alternatively, increasing the RRR decreases the money available to potential borrowers, which could lead to a decline in economic activity and higher purchasing power of the money circulating in markets.