Economics • Banking & FinanceMedium
What is the policy regarding interest paid by the Reserve Bank of India to commercial banks on the balances maintained under the Cash Reserve Ratio (CRR)?
A. Paid at Repo Rate
B. Paid at Bank Rate
C. Paid at Savings Rate
D. No interest is paid✓ Correct Answer
💡 Solution & Explanation
Following an amendment to Section 42 of the Reserve Bank of India Act in 2006, the central bank ceased paying any interest on Cash Reserve Ratio balances maintained by scheduled commercial banks starting in April 2007. The incorrect options suggest various benchmark rates like the repo rate or savings rate, which do not apply to mandatory reserve maintenance.
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