Question

    The Cash Reserve Ratio refers

    to?
    A the share of Net Demand and Time Liabilities that banks have to hold as liquid assets Correct Answer Incorrect Answer
    B the share of Net Demand and Time Liabilities that banks have to hold as balances with the RBI Correct Answer Incorrect Answer
    C the share of Net Demand and Time Liabilities that banks have to hold as part of their cash reserves Correct Answer Incorrect Answer
    D the ratio of cash holding to reserves of banks Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Cash reserve Ratio (CRR) is the share of Net Demand and Time Liabilities that the banks have to hold as liquid assets. Cash Reserve Ratio (CRR) is a specific portion of the total deposit that is held as a reserve by the commercial banks and is mandated by the RBI (Reserve Bank of India). This particular amount is held as a reserve in the form of cash or as a cash equivalent which is stored in the bank’s vault or is sent to the RBI. Cash Reserve Ratio in the case of India is decided by the MPC (Monetary Policy Committee) under the periodic Monetary and Credit Policy.

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