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    Question

    What is the rate of interest earned on CRR maintained by

    banks with RBI?
    A 2.5% Correct Answer Incorrect Answer
    B 3% Correct Answer Incorrect Answer
    C 4% Correct Answer Incorrect Answer
    D 4.5% Correct Answer Incorrect Answer
    E No interest earned Correct Answer Incorrect Answer

    Solution

    Banks in India are required to hold a certain proportion of their deposits in the form of cash. However banks do not hold these as cash with themselves; they deposit such cash (i.e. currency chests) with RBI, which is considered as equivalent to holding cash with them. This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. Note – the bank does not earn any interest on these cash deposits kept with the RBI. Snapshot from study notes of the ixamBee SEBI course covering topic in crisp and easy to remember format

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