Question
Download Solution PDFIn the context of the Indian banking system, the ‘Cash Reserve Ratio’ is decided by _____.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is the Reserve Bank of India.
Key Points
- Every commercial bank in India is required by the RBI to keep a specific minimum amount of deposits as a reserve, which is known as the "cash reserve ratio" (CRR).
- The CRR shall be set in accordance with RBI guidelines.
- Cash Reserve Ratio ensures that a part of the bank’s deposit is with the Central Bank and is hence, secure.
- Controlling inflation is one of CRR's other goals.
- When there is significant economic inflation, the RBI increases the CRR to lower the amount of cash available to banks for loan approvals.
- It restricts the economy's ability to move money, which lowers investments and inflation.
- As per the current monetary policy announced on September 30, 2022:
- The repo rate stands at 4.00% and the reverse repo rate at 3.35%.
- The marginal standing facility (MSF) rate and the Bank Rate stand at 4.25%.
- The CRR rate and SLR rate stand at 4.50% and 18.00%.
Last updated on Jun 7, 2025
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