BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the fraction of the deposits that commercial banks lend to the customers
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the fraction of the deposits that RBI must keep with commercial banks
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the fraction of the deposits that commercial banks must keep with RBI
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Detailed explanation-1: -The cash balance that is to be maintained by scheduled banks with the RBI should not be less than 4% of the total NDTL, which is the Net Demand and Time Liabilities.
Detailed explanation-2: -Technically, the cash reserves for a scheduled commercial bank must not fall below 6% of the total net demand and time liabilities (NDTL) that the bank holds on a fortnight basis. Earlier, CRR ranged from 3% to 20%; however, there is no upper or lower limit now.
Detailed explanation-3: -Cash reserve ratio (CRR) is a specified minimum fraction of the total deposits of customers with the bank, which the commercial banks have to hold as reserves in cash or as deposits with the Central Bank. CRR is set according to the guidelines of the Central Bank of a country.
Detailed explanation-4: -The Cash Reserve Ratio (CRR) refers to the share of Net Demand and Time Liabilities that banks have to hold as balances with the RBI. The objective of CRR is to keep inflation under control. During high inflation in the economy, the central bank raises the CRR to lower the bank’s loanable funds.