What is the purpose of the Cash Reserve Ratio (CRR)?

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Question: What is the purpose of the Cash Reserve Ratio (CRR)?

Options:

Correct Answer: To regulate the money supply

Solution:

The Cash Reserve Ratio (CRR) is used to regulate the money supply by requiring banks to hold a certain percentage of their deposits with the RBI.

What is the purpose of the Cash Reserve Ratio (CRR)?

What is the purpose of the Cash Reserve Ratio (CRR)?

Step 1: Understand that the Cash Reserve Ratio (CRR) is a rule for banks.
Step 2: Know that CRR requires banks to keep a part of their money with the Reserve Bank of India (RBI).
Step 3: Realize that this part is a percentage of the total money that customers deposit in the bank.
Step 4: Learn that the purpose of CRR is to control how much money is available in the economy.
Step 5: Remember that by adjusting the CRR, the RBI can influence lending and spending in the economy.

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