BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Only 1
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Only 2
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Only 3
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All the above
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Detailed explanation-1: -When RBI wants to reduce liquidity in the banking system, it increases the CRR as it reduces the money supply in the economy.
Detailed explanation-2: -So, When CRR is increased, it decreases money supply, Increases interest rates on home loans, car loans etc. and in inter-bank market, Increases demand for money and decreases inflation.
Detailed explanation-3: -Both CRR and SLR are crucial to the economy as they maintain cash flow and regulate liquidity in the country. These financial rates have an undeniable impact on the loan market of the country. The rates also change as per the changes in the economic climate of the country.
Detailed explanation-4: -The ratio refers to the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. So, if SLR increases then commercial banks will face liquidity crunch and will have less ability to inject money into the economy.