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What does RBI do when it wants to reduce liquidity in the banking system?
  • a)
    It increases the CRR.
  • b)
    It decreases the SLR.
  • c)
    It decreases the repo rate.
  • d)
    It decreases the reverse repo rate.
  • e)
    It maintains the same bank rate.
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
What does RBI do when it wants to reduce liquidity in the banking syst...
Increase in CRR leads to less amount of availability of money to circulate in the economy which leads to less liquidity. Since, the banks cannot lend as much as earlier, they increase the rate of interest and thus the lending rates become very high.
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What does RBI do when it wants to reduce liquidity in the banking system?a)It increases the CRR.b)It decreases the SLR.c)It decreases the repo rate.d)It decreases the reverse repo rate.e)It maintains the same bank rate.Correct answer is option 'A'. Can you explain this answer?
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