1
Question
Q. Consider the following statements with respect to Cash Reserve Ratio (CRR):
Which of the statements given above is/are correct?
Q. Consider the following statements with respect to Cash Reserve Ratio (CRR):
Which of the statements given above is/are correct?Open in App
Solution
The correct option is A 1 only
Explanation:
Statement 1 is correct: The CRR denotes a certain percentage of total deposits the commercial banks, which are required to maintain in the form of cash reserves with the central bank.
Statement 2 is incorrect: The cash is either stored with the bank themselves or is sent to the RBI. Banks do not get any interest on the money that is with the RBI under the CRR.
Statement 3 is incorrect: At the time of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves so that they have less money to lend.
Explanation:
Statement 1 is correct: The CRR denotes a certain percentage of total deposits the commercial banks, which are required to maintain in the form of cash reserves with the central bank.
Statement 2 is incorrect: The cash is either stored with the bank themselves or is sent to the RBI. Banks do not get any interest on the money that is with the RBI under the CRR.
Statement 3 is incorrect: At the time of high inflation in the economy, RBI increases the CRR, so that banks need to keep more money in reserves so that they have less money to lend.
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