Consider the following statements regarding Cash Reserve Ratio CRR 1 Percentage of bank deposits whi...........

Economic Affairs Money Supply and Monetary Policy

Consider the following statements regarding Cash Reserve Ratio (CRR):

1. Percentage of bank deposits which every bank is required to keep with RBI in the form of reserves and/or balances.

2. Higher the CRR with the RBI, the lesser will be the liquidity in the banking system.

Which of the above statements is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

1st statement is incorrect. Increasing the reverse repo-rate can be a suggestive monetary policy to combat inflation.

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