Q. Consider the following statements regarding “The cash reserve ratio (CRR)”:
1.It is the ratio of the total deposits of a bank in India which is kept with the RBI in the form of cash.
2.The ratio is fixed by the Department of Financial Services.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A
Notes:

Explanation: The cash reserve ratio (CRR) is the ratio (fixed by the RBI) of the total deposits of a bank in India which is kept with the RBI in the form of cash. This was fixed to be in the range of 3 to 15 per cent.

A recent Amendment (2007) has removed the 3 per cent floor and provided a free hand to the RBI in fixing the CRR.

Source: Ramesh Singh

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