Maharashtra State BoardHSC Commerce 12th Board Exam
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Write Short Note on : Cash Reserve Ratio (Crr) - Economics

Answer in Brief

Write Short note on : 
Cash Reserve Ratio (CRR)

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Solution

 CRR or the Cash Reserve Ratio refers to the minimum amount of funds that a commercial bank has to maintain with the Reserve Bank of India in the form of deposits. For example, suppose the total assets of a bank are worth Rs.200 Crores and the minimum cash reserve ratio is 10%, the amount that the commercial bank has to maintain with RBI is Rs.20 Crores. If this ratio rises to 20%, the reserve with RBI increases to Rs.40 Crores. Thus, less money will be left with the commercial bank for lending. This will eventually lead to considerable decrease in the money supply.

Concept: Central Bank Function - Banker's Bank
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APPEARS IN

Micheal Vaz Economics HSC 12th Standard Maharashtra State Board
Chapter 13 Central Banking
Exercise | Q 2.5 | Page 122
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