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प्रश्न
State the impact of an increase in Cash Reserve Ratio on loanable funds.
What is the impact of an increase in Cash Reserve Ratio on loanable funds?
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उत्तर
- An increase in the Cash Reserve Ratio (CRR) requires commercial banks to maintain a higher portion of their deposits as reserves with the Reserve Bank of India.
- This reduces the amount of money available to banks for lending, resulting in a fall in total loanable funds.
- As a result, bank's ability to lend to consumers and businesses decreases, thereby slowing economic activity.
संबंधित प्रश्न
The rate of which commercial banks borrow from the Central Bank is the:
Explain how credit rationing helps to control credit in an economy.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Increase in cash reserve ratio adversely affects the capacity of commercial banks to create credit.
Reason (R): An increase in cash reserve ratio reduces the excess reserves of commercial banks and hence limits their credit creating power.
Define the term Statutory Liquidity Ratio.
Define the following term:
Margin Requirements.
Central bank is the lender of the last resort. Explain.
What is this policy called that controls the credit supply in an economy?
Which are qualitative methods of credit control?
Define moral persuasion.
