Q. Consider the following statements:- The Reserve Bank of India (RBI) exercises its regulatory powers to limit the credit creation ability of commercial banks.
- The Cash Reserve Ratio (CRR) refers to the proportion of a bank's total deposits that must be maintained as cash reserves with the RBI.
Which of the above statements is / are correct?
Answer:
Both 1 and 2
Notes: Both statements are correct. The RBI mandates a certain percentage of bank deposits to be maintained as CRR, restricting banks' lending capacity and managing liquidity in the economy. This is a legally binding requirement. The CRR is the portion of deposits kept with the RBI in cash, thereby also serving as a tool for monetary control.