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The percentage of demand and time liabilities that banks have to keep with RBI is
- a)SLR
- b)CRR
- c)OMO
- d)Bank rate
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
The percentage of demand and time liabilities that banks have to keep ...
The percentage of demand and time liabilities that banks have to keep with RBI is called cash reserve ratio.
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The percentage of demand and time liabilities that banks have to keep ...
Explanation:
- CRR stands for Cash Reserve Ratio. It is the percentage of total demand and time liabilities that banks have to keep as a reserve with the Reserve Bank of India (RBI).
- The primary objective of CRR is to ensure that banks have enough liquidity to meet the withdrawal demands of their depositors.
- The RBI uses CRR as a tool to control the money supply in the economy. If the RBI wants to increase the money supply, it can lower the CRR, which would free up more funds for banks to lend. Conversely, if it wants to decrease the money supply, it can raise the CRR, which would reduce the amount of funds available for lending.
- The current CRR in India is 4% of the net demand and time liabilities of banks.
- CRR is a non-interest bearing reserve. Therefore, banks do not earn any interest on the amount they keep as CRR.
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The percentage of demand and time liabilities that banks have to keep with RBI isa)SLRb)CRRc)OMOd)Bank rateCorrect answer is option 'B'. Can you explain this answer?
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