Question

Maximum credit that the commercial banks can legally create is indicated by:

• A. $\frac{1}{\text{SLR}}$
• B. $\frac{1}{\text{CRR}}\times \frac{1}{\text{Cash Reserves with the RBI}}$
• C. $\frac{1}{\text{CRR}}\times \text{Total deposits}$
• D. $\frac{1}{\text{CRR}}\times \text{Cash reserves with the RBI}$

Answer 1

The correct option is C

$\frac{1}{\text{CRR}}\times \text{Total deposits}$

$\frac{1}{\text{CRR}}\times \text{Total deposits}$ is the total amount of credit banks can create.