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    Question

    The Cash Reserve Ratio (CRR) is revised by RBI to

    improve liquidity. Which of the following correctly describes the CRR?  
    A Interest-earning deposits kept by commercial banks with another bank Correct Answer Incorrect Answer
    B Interest-free deposits kept by commercial banks with another bank Correct Answer Incorrect Answer
    C Interest-earning deposits kept by commercial banks with RBI Correct Answer Incorrect Answer
    D Interest-free deposits kept by commercial banks with RBI Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    CRR, or Cash Reserve Ratio, is the percentage of a bank's total deposits that they are required to keep with the Reserve Bank of India (RBI) as reserves . The minimum CR requirement is specified by RBI which is a percentage of the Net Demand and Time Liabilities (NDTL) of the bank.   Banks can not lend the CRR money to corporates or individual borrowers, nor use that money for investment purposes. Banks do n o t earn any interest on that CRR.

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