If the cash reserve ratio (CRR) is lowered by RBI, the credit available will ____.

increase

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decrease

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remain unaffected

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none of the above

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Solution

The correct option is B increase
The Cash Reserve Ratio refers to a certain percentage of total deposits the commercial banks are required to maintain in the form of cash reserve with the Reserve Bank of India.
If the CRR is decreased, then commercial banks have more deposits to give to the public in the form of loans.
Thus, the credit available to the public will increase.

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Similar questions

Q. Consider the following statements with respect to Cash Reserve Ratio (CRR):

Which of the statements given above is/are correct?

What will happen if the RBI increases the Cash Reserve Ratio?

If CRR (cash reserve ratio) is increased from 10% to 20%, what should be the change in credit supply, other things remaining constant? Explain.

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