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What does the Cash Reserve Ratio (CRR) refer to?

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Question: What does the Cash Reserve Ratio (CRR) refer to?

Options:

  1. The percentage of total deposits that banks must hold as reserves with the RBI
  2. The interest rate at which banks borrow from the RBI
  3. The amount of money banks can lend to customers
  4. The total capital banks must maintain

Correct Answer: The percentage of total deposits that banks must hold as reserves with the RBI

Solution: 

CRR is the percentage of total deposits that banks must hold as reserves with the RBI.

What does the Cash Reserve Ratio (CRR) refer to?

Practice Questions

Q1
What does the Cash Reserve Ratio (CRR) refer to?
  1. The percentage of total deposits that banks must hold as reserves with the RBI
  2. The interest rate at which banks borrow from the RBI
  3. The amount of money banks can lend to customers
  4. The total capital banks must maintain

Questions & Step-by-Step Solutions

What does the Cash Reserve Ratio (CRR) refer to?
  • Step 1: Understand that banks receive money from customers as deposits.
  • Step 2: Know that banks cannot use all of this money for lending or investing.
  • Step 3: Learn that a part of these deposits must be kept aside as reserves.
  • Step 4: Recognize that the Cash Reserve Ratio (CRR) is the specific percentage of total deposits that banks must keep as reserves.
  • Step 5: Remember that these reserves are held with the Reserve Bank of India (RBI).
  • Cash Reserve Ratio (CRR) – CRR is the percentage of total deposits that banks must hold as reserves with the Reserve Bank of India (RBI).
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