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Question
The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called ______.
Options
Statutory liquidity ratio
Deposit ratio
Cash reserve ratio
Legal reserve ratio
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Solution
The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called cash reserve ratio.
Explanation:
The Cash Reserve Ratio (CRR) is the proportion of total deposits a commercial bank must keep in reserve with the Reserve Bank of India (RBI). This requirement ensures that banks keep a percentage of their deposits as reserves to help control liquidity in the banking system.
RELATED QUESTIONS
Credit creation by commercial banks is determined by (Choose the correct alternative)
Explain the credit creation role of commercial banks with the help of a numerical example.
Do you consider a commercial bank ‘creator of money’ in the economy’?
______ is the main source of money supply in an economy.
Access to adequate and timely credit at affordable rates is critical for the rural poor to alleviate high cost debt and invest in livelihood opportunities. Despite the Government of India's best efforts, financial inclusion of the rural poor has been beset with multiple challenges. Lack of adequate banking infrastructure and human resources in rural areas, unplanned expansion leading to unviable bank branches and low levels of financial literacy amongst the rural populace have been some of the key challenges.
The most vulnerable communities, who often had no formal credit history or ability to provide collateral, have often been the worst affected. Inability to access loans from banks meant that the poorest had to resort to moneylenders for loans at unreasonably high rates of interest that invariably led them into a toxic debt trap.
In this context, the SHG-Bank Linkage programme, formalised by the National Bank for Agriculture and Rural Development (NABARD) in 1995, synthesizes 'formal financial systems' (in terms of a formal institution providing credit) with the 'informal sector' (comprising of rural poor with no formal credit history), has emerged as a preferred vehicle for providing financial services to the hitherto unbanked poor.
Community Based Repayment Mechanisms (CBRMs) have been institutionalised at branches involved in financing SHGs to monitor and ensure timely repayment of loans by SHGs. The number of SHGs with outstanding bank loans stands at nearly 5 million today, implying that the program has brought formal banking services to over 50 million women.
Which of the following is a crucial area of improvement for rural banking?
Suppose in an economy, the initial deposit of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crore. Then the value of reserve requirements would be ______.
Which of these banks formulates the credit control tools?
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Credit Creation comes to an end when total cash reserves become equal to the initial deposits.
Reason (R): The value of money multiplier is determined by Legal Reserve Ratio (LRR).
What are secondary (derivative) deposits?
Why are the banks required to keep only a fraction of deposits as cash reserves?
