Question

    Consider the following statements regarding the Cash

    Reserve Ratio (CRR): 1. Banks earn interest on the CRR balances maintained with the RBI. 2. An increase in CRR helps in sucking out liquidity from the banking system. 3. CRR is applicable only to Public Sector Banks. Which of the statements above is/are correct? 
    A 1 and 2 only Correct Answer Incorrect Answer
    B 2 only Correct Answer Incorrect Answer
    C 2 and 3 only Correct Answer Incorrect Answer
    D 1, 2, and 3 Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Banks do not earn any interest on CRR. It is applicable to all Scheduled Commercial Banks (Public, Private, Foreign, RRBs, and Cooperatives).

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