Question
Consider the following statements regarding Cash Reserve Ratio (CRR) kept with RBI by commercial banks:
Select the correct answer using the code given below:
- It ensures safety to the people’s deposits in banks
- It ensures the solvency of banks
- It increases the cost of funds for the banks
- Banks earn interest on CRR
Select the correct answer using the code given below:
Answer: Option B
Answer: (b)
One of the basic reasons for keeping CRR with RBI is to provide safety to the public deposits. It also ensures the solvency of banks i.e. staying in business and proper functioning and liquidity situation.
Since banks do not earn interest on the CRR, so it is idle money for the banks which increases costs for banks.
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Answer: (b)
One of the basic reasons for keeping CRR with RBI is to provide safety to the public deposits. It also ensures the solvency of banks i.e. staying in business and proper functioning and liquidity situation.
Since banks do not earn interest on the CRR, so it is idle money for the banks which increases costs for banks.
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