The correct statement is: CRR is the percentage of deposits which a bank must keep with itself in the form of any liquid asset.

Explanation:
What is Cash Reserve Ratio (CRR)?
- Cash Reserve Ratio (CRR) is a monetary policy tool used by the central bank of a country to control the money supply in the economy.
- It is the percentage of a bank's total deposits that it must keep with itself in the form of cash reserves.
- In India, the Reserve Bank of India (RBI) determines the CRR for banks operating in the country.

Impact of CRR on Credit Creation:
- The cash reserve ratio has a significant impact on the credit creation capacity of banks.
- When the CRR is increased, banks are required to keep a higher proportion of their deposits as cash reserves with the central bank.
- This reduces the amount of money available with banks for lending purposes and hence restricts credit creation.
- On the other hand, when the CRR is decreased, banks are required to keep a lower proportion of their deposits as cash reserves.
- This increases the amount of money available with banks for lending purposes and hence promotes credit creation.

Relationship between CRR and Credit Creation:
- The relationship between CRR and credit creation can be explained through the money multiplier concept.
- The money multiplier is the multiple by which the money supply in the economy expands with an initial deposit.
- It is calculated as the reciprocal of the reserve ratio (1/CRR).
- When the reserve ratio (CRR) is high, the money multiplier is low, and vice versa.
- This means that a higher CRR reduces the money multiplier and limits the credit creation capacity of banks.
- Conversely, a lower CRR increases the money multiplier and enhances the credit creation capacity of banks.

Conclusion:
- The cash reserve ratio (CRR) is the percentage of deposits that banks must keep as cash reserves with the central bank.
- Higher CRR implies a lower credit creation capacity of banks, as it reduces the amount of money available for lending.
- Lower CRR, on the other hand, increases the credit creation capacity of banks, as it increases the amount of money available for lending.
- Thus, the correct statement is that higher the reserve requirement (CRR), lower will be the credit creation in the economy.