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If cash reserve ratio decreases, credit creation will _______.
Increase
Decrease
Does not change
First decreases than increases
The Cash Reserve Ratio refers to a certain percentage of total deposits the commercial banks are required to maintain in the form of cash reserve with the Reserve Bank of India. If the CRR is decreased, then commercial banks have more deposits to give to the public in the form of loans. Thus, the credit available to the public will increase. Hence option 1st is correct.
By: Amit Kumar ProfileResourcesReport error
Sunil Garg
Answer must be "decrease"
It will increase because the Cash Reserve Ratio refers to a certain percentage of total deposits the commercial banks are required to maintain in the form of cash reserve with the Reserve Bank of India. If the CRR is decreased, then commercial banks have more deposits to give to the public in the form of loans. Thus, the credit available to the public will increase.
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