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_____________ refers to that portion of total deposits of a commercial bank which it has to keep with RBI in the form of cash reserves.
- a)CRR
- b)SLR
- c)Bank Rate
- d)Repo Rate
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
_____________ refers to that portion of total deposits of a commercial...
The correct answer is CRR (Cash Reserve Ratio).
Explanation:
The Cash Reserve Ratio (CRR) is the portion of a commercial bank's total deposits that it is required to keep with the Reserve Bank of India (RBI) in the form of cash reserves. The purpose of maintaining this reserve is to ensure the solvency and liquidity of the banking system and control the expansion of credit in the economy. Here are some key points about CRR:
- CRR is a monetary policy tool used by the RBI to regulate the money supply in the economy.
- It is expressed as a percentage of a bank's net demand and time liabilities (NDTL).
- The RBI sets the CRR rate and may change it from time to time to meet economic objectives.
- By increasing the CRR, the RBI can reduce the amount of money available for lending by banks, thus controlling inflation.
- Conversely, by decreasing the CRR, the RBI can increase the amount of money available for lending, stimulating economic growth.
- The CRR does not earn any interest for the banks and is maintained with the RBI in cash or as a balance in a current account.
- As of the current guidelines, the CRR rate for scheduled commercial banks in India is 3% of their NDTL.
In conclusion, the correct answer is A: CRR (Cash Reserve Ratio), which refers to that portion of total deposits of a commercial bank which it has to keep with RBI in the form of cash reserves.
Explanation:
The Cash Reserve Ratio (CRR) is the portion of a commercial bank's total deposits that it is required to keep with the Reserve Bank of India (RBI) in the form of cash reserves. The purpose of maintaining this reserve is to ensure the solvency and liquidity of the banking system and control the expansion of credit in the economy. Here are some key points about CRR:
- CRR is a monetary policy tool used by the RBI to regulate the money supply in the economy.
- It is expressed as a percentage of a bank's net demand and time liabilities (NDTL).
- The RBI sets the CRR rate and may change it from time to time to meet economic objectives.
- By increasing the CRR, the RBI can reduce the amount of money available for lending by banks, thus controlling inflation.
- Conversely, by decreasing the CRR, the RBI can increase the amount of money available for lending, stimulating economic growth.
- The CRR does not earn any interest for the banks and is maintained with the RBI in cash or as a balance in a current account.
- As of the current guidelines, the CRR rate for scheduled commercial banks in India is 3% of their NDTL.
In conclusion, the correct answer is A: CRR (Cash Reserve Ratio), which refers to that portion of total deposits of a commercial bank which it has to keep with RBI in the form of cash reserves.
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_____________ refers to that portion of total deposits of a commercial bank which it has to keep with RBI in the form of cash reserves.a)CRRb)SLRc)Bank Rated)Repo RateCorrect answer is option 'A'. Can you explain this answer?
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