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

Practice Questions

Q1
What is the purpose of the Cash Reserve Ratio (CRR)?
  1. To control inflation
  2. To ensure liquidity in the economy
  3. To regulate the money supply
  4. To provide funds for government projects

Questions & Step-by-Step Solutions

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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