Economics • Banking & FinanceEasy
Which of the following statements accurately describes 'Cash Reserve Ratio (CRR)'?
A. The minimum percentage of total deposits that commercial banks must keep in liquid cash with the Reserve Bank of India✓ Correct Answer
B. The total amount of government securities that commercial banks must hold to meet statutory liquidity requirements
C. The interest rate charged by the central bank on overnight loans extended to commercial banks against approved collateral
D. The proportion of foreign exchange earnings that exporters must surrender to the central bank
💡 Solution & Explanation
Cash Reserve Ratio refers to the mandatory minimum percentage of total deposits that commercial banks must maintain in liquid cash with the central bank. It differs from the Statutory Liquidity Ratio, which requires banks to hold safe assets in their own vaults. The Reserve Bank of India utilizes CRR as a vital monetary policy tool to manage liquidity in the economy.
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