Question

    The RBI is empowered to set the CRR at any level subject

    to range (lower-upper limit) of ____
    A 2% and 15% Correct Answer Incorrect Answer
    B 3% and 20% Correct Answer Incorrect Answer
    C 5% and 25% Correct Answer Incorrect Answer
    D 6% and 20% Correct Answer Incorrect Answer
    E 3% and 5% Correct Answer Incorrect Answer

    Solution

    Cash Reserve Ratio refers to the fraction of the total Net Demand and Time Liabilities (NDTL) of a Scheduled Commercial Bank held in India, that it has to maintain as cash deposit with the Reserve Bank of India (RBI). The requirement applies uniformly to all banks in the country irrespective of an individual bank’s financial situation or size. Traditionally, the amount held to cater to the CRR requirement was stipulated to be no lower than 3 percent and no higher than 20 percent of the total NDTL held in India. However, the RBI (amendment) Act, 2006 provides for removal of the floor and ceiling with respect to setting the CRR and authorizes the RBI to set the ratio in keeping with the broad objective of maintaining monetary stability in the economy.

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