Question
An increase in CRR by the Reserve Bank of India results in
Answer: Option B
Answer: (b)
The Cash Reserve Ratio is the amount of funds that the banks are bound to keep with the Reserve bank of India as a portion of their Net Demand and Time Liabilities (NDTL).
When RBI increases the CRR, fewer funds are available with banks as they have to keep larger portions of their cash in hand with RBI. This means that banks will now have less money to play with.
This resulted in a reduction in liquidity in the economy.
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Answer: (b)
The Cash Reserve Ratio is the amount of funds that the banks are bound to keep with the Reserve bank of India as a portion of their Net Demand and Time Liabilities (NDTL).
When RBI increases the CRR, fewer funds are available with banks as they have to keep larger portions of their cash in hand with RBI. This means that banks will now have less money to play with.
This resulted in a reduction in liquidity in the economy.
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