Question

Manipulation in CRR enables the RBI to ______.

• A. Influence the lending ability of the commercial banks
• B. Check unemployment growth
• C. Check poverty
• D. Increase GDP

Answer 1

The correct option is A Influence the lending ability of the commercial banks

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. If the cash reserve ratio is high, then the bank will have to maintain more amount of cash with the central bank which will reduce their lending capacity and if the cash reserve ratio is low, then the bank will have to maintain less amount of cash with the central bank which will increase their lending capacity. Therefore, Manipulation in cash reserve ratio enables the Reserve Bank of India(RBI) to affect the lending capacity of the commercial banks.