Commercial Banks in India are required to maintain a certain ratio between their cash in hand and to...........

Economic Affairs Types of Banks and Banking

Commercial Banks in India are required to maintain a certain ratio between their cash in hand and total assets. This ratio is called:

Cash Reserve Ratio

Statutory Liquidity Ratio

Capital Adequacy Ratio

Debt-Equity Ratio

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Explanation:

1st option is correct.
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks comes down. The RBI uses the CRR to drain out excessive money from the system. Commercial banks are required to maintain with the RBI an average cash balance, the amount of which shall not be less than 3% of the total of the Net Demand and Time Liabilities (NDTL), on a fortnightly basis and the RBI is empowered to increase the rate of CRR to such higher rate not exceeding 20% of the NDTL.