Explanation:

  If the cash reserve ratio (CRR) is lowered by the RBI it will increase the lending capacity of the commercial banks.

CRR is a cash reserve ratio, Under CRR a certain percentage of the total bank deposits has to be kept in the current account with RBI which means banks do not have access to that much amount for any economic activity or commercial activity. Banks can’t lend the money to corporates or individual borrowers, banks can’t use that money for investment purposes. So, that CRR remains in current account and banks don’t earn anything on that.