What is the significance of the CRR (Cash Reserve Ratio)?

Question
  • A. The ratio of a bank's profits to its expenses
  • B. The ratio of a bank's loans to its deposits
  • C. The percentage of a bank's total deposits that must be maintained with the RBI
  • D. The interest rate on government bonds
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correct Answer ( C )

The Cash reserve Ratio (CRR) is the percentage of the total deposits that a bank is required to maintain with the Reserve Bank of India (RBI) in the form of cash or balances . This regulation ensures that banks have enough liquidity to meet their daily obligations and prevents excessive lending . A higher CRR reduces the money available for lending, tightening the money supply and possibly curbing inflation . A lower CRR increases the money available for lending , potentially stimulating economic growth .

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2025-03-24T19:40:49+00:00 0 views