As we know that Reserve Bank of India changes the CRR. Which of the following statement is correct in this regard?begin{enumerate}item Reduction in CRR increases the liquidity position within Indian banks.item Decrease in CRR decreases lending capacity of banks.item Increase in CRR does not affect the liquidity position.end{enumerate}

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

As we know that Reserve Bank of India changes the CRR. Which of the following statement is correct in this regard?

A	Only 1
B	1 and 3
C	Only 3
D	Only 2

Explanation:

Detailed explanation-1: -For this, RBI increases the CRR, lowering the loanable funds available with the banks. This, in turn, slows down investment and reduces the supply of money in the economy. As a result, the growth of the economy is negatively impacted. However, this also helps bring down inflation.

Detailed explanation-2: -The correct answer is It is the minimum amount banks deposit with the Reserve bank of India. Cash Reserve Ratio or CRR is the minimum amount banks have to deposit or keep with the Reserve Bank of India (RBI), and not with themselves.

Detailed explanation-3: -The correct answer is It will increase. Cash Reserve Ratio (C. R. R.) refers to the number of money banks have to keep with the central bank. If RBI reduces the cash reserve ratio, credit creation will increase.

Detailed explanation-4: -CRR refers to the percentage of deposits banks have to keep as reserve (in cash). This reserve sum is not available for banks for lending and thus if the CRR increases, banks will have less money to lend.

There is 1 question to complete.