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Question
CRR and SLR reduction ______ credit in economy.
CRR and SLR reduction ______ credit in economy.
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Solution
The correct option is A increases
Cash Reserves Ratio (CRR) refers to the
proportion of total deposits of the commercial banks which they must keep
as reserves with the central bank in the form of cash whereas Statutory Liquidity Ratio (SLR) refers to liquid
assets i.e. cash which the commercial banks must hold with themselves on a
daily basis as a portion of their total deposits. By reducing the cash reserve ratio and statutory liquidity ratio, the
commercial banks has to maintain less cash with the central bank and with themselves respectively which increases their credit creation capacity and therefore, increases the total volume of credit in the economy.
Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash whereas Statutory Liquidity Ratio (SLR) refers to liquid assets i.e. cash which the commercial banks must hold with themselves on a daily basis as a portion of their total deposits. By reducing the cash reserve ratio and statutory liquidity ratio, the commercial banks has to maintain less cash with the central bank and with themselves respectively which increases their credit creation capacity and therefore, increases the total volume of credit in the economy.
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