Question

What is CRR?

• A. The rate at which commercial banks borrow money from the Reserve Bank of India
• B. The rate at which RBI borrows money from the commercial banks
• C. It's a rate at which RBI decides the sale and purchase of capital assets with foreign banks
• D. It is a proportion of cash, the commercial banks have to deposit with the RBI

Answer 1

The correct option is D It is a proportion of cash, the commercial banks have to deposit with the RBI

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. In other words it is the proportion of cash which the commercial have to deposit to the Reserve Bank of India(RBI) which is the central bank in India. Cash reserve ratio is determined by RBI so that they can control the amount of credit creation of the commercial banks at the time of inflation or deflation in the economy.