Consider the following statements regarding Cash Reserve Ratio CRR kept with RBI by commercial...........

Economic Affairs Money Supply and Monetary Policy

Download Solution PDF

Consider the following statements regarding Cash Reserve Ratio (CRR) kept with RBI by commercial banks

1. It can be utilized to regulate inflation in economy

2. It ensures solvency of banks

3. It increases the cost of funds for the banks

4. Banks earn interest on CRR

Select the correct answer using the code given below:

1 only

1 and 2 only

1, 2 and 3 only

All of the above

छोटे Courses बड़े Results

Master Money Supply and Monetary Policy

Prepare through Micro-courses

Try Now

Explanation:

One of the basic reasons of keeping CRR with RBI is to provide safety to the public deposits. It also insures solvency i.e. staying in business and liquidity problems.
Since banks do not earn interest on the CRR, so it is idle money for the banks which increases its costs.