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    Question

    Which out of the following is/are correct regarding

    Cash Reserve Ratio (CRR)? Section 42 of RBI Act, 1934 lays foundation for maintaining CRR by scheduled commercial bank with RBI. Section 24 of the Banking Regulations Act, 1949 provide powers to RBI to levy CRR on banks As of Feb 2021, CRR is 3 per cent of NDTL Read the following passage and answer the next 4 questions (Q14-Q15) 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. Scheduled Commercial Banks (that includes public and private sector banks, foreign banks, regional rural banks and co-operative banks) are required to maintain a cash balance on average with the RBI on a fortnightly basis to cater to the CRR requirement. Non Bank Financial Corporations (NBFCs) are outside the purview of this reserve requirement. Act also authorizes RBI to stipulate an additional or incremental CRR, which, however, has not been put in place by RBI. Banks have to maintain 100% CRR on an average basis during the fortnight. That is, it is not necessary that on all days CRR has to be at 100%.  
    A I and II Correct Answer Incorrect Answer
    B II and III Correct Answer Incorrect Answer
    C I and III Correct Answer Incorrect Answer
    D All are correct Correct Answer Incorrect Answer
    E None is correct Correct Answer Incorrect Answer

    Solution

    According to Section 42 of the Reserve Bank of India Act, 1934, each scheduled commercial bank has to maintain a minimum cash balance with the Reserve Bank as cash reserve ratio (CRR) which is prescribed by the Reserve Bank from time to time as certain percentage of its net demand and time liabilities (NDTL) relating to the second preceding fortnight.

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