Economics • Banking & FinanceEasy
What does the term 'Cash Reserve Ratio (CRR)' signify for a scheduled commercial bank in India?
A. The percentage of total deposits that banks must keep as liquid cash with themselves
B. The percentage of total demand and time liabilities that banks must maintain as cash reserves with the Reserve Bank of India✓ Correct Answer
C. The proportion of loans that must be allocated to priority sectors annually
D. The amount of capital required to cover operational risk losses
💡 Solution & Explanation
Cash Reserve Ratio specifies the minimum fraction of total customer deposit liabilities, known as net demand and time liabilities, that commercial banks must maintain with the central bank as cash reserves. Maintaining reserves with the central bank helps control money supply expansion. Vault cash kept within bank branches forms part of the statutory liquidity ratio instead.
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