ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What is the Cash Reserve Ratio (CRR)?
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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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None of the above
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Explanation:
Detailed explanation-1: -This is the RBI’s way of controlling the excess flow of money in the economy. 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: -Cash reserve ratio (CRR) is the percentage of a bank’s total deposits that it needs to maintain as liquid cash. This is an RBI requirement, and the cash reserve is kept with the RBI. A bank does not earn interest on this liquid cash maintained with the RBI and neither can it use this for investing and lending purposes.
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