Which of the following can lead to reduction in interest rates by the banks 1 Infusion of capital by...........

Indian Economy (Easy) Money and banking

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Which of the following can lead to reduction in interest rates by the banks?

1.Infusion of capital by the government into Banks.

2.Increased cash holding with thepublic.

3.Reduction of repo rate by RBI

2 and 3 only

1 and 2 only

1 and 3 only

All

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Explanation:

Infusion of Capital into Banks will lead to more liquidity for the banks. Similar is the case with reduced repo rate as they have to pay less interest rate to RBI for the borrowed money. But, higher cash holding with the public leads to liquidity deficit for the banks and the lack of liquidity won’t allow banks to reduce interest rates.