Question
What the true about CRR (Cash Reserve Ratio)?
i. CRR is determined by a percentage of Net demand and time liabilities ii. The amount specified as the CRR is held in cash and cash equivalents, is stored in bank vaults or parked with the RBI. iii. CRR is a crucial monetary policy tool iv. CRR is maintained to ensure that banks do not run out of cash to meet the payment demands of their depositorsSolution
CRR Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country. CRR is important monetary tool as RBI can increase CRR to control high inflation. Increase in SLR will reduce the money supply in the system.
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