With reference to the Incremental cash reserve ratio (I-CRR) consider the following statements:1.I-CRR is an additional cash balance which the RBI can ask banks to maintain over and above the Cash Reserve Ratio (CRR).2.I-CRR was announced as a measure to maintain excess liquidity in the banking system.Select the correct statements using the codes given below:

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A

Notes:

Explanation –

Statement 1 is correct. I-CRR is an additional cash balance which the RBI can ask banks to maintain over and above the Cash Reserve Ratio (CRR).

Statement 2 is incorrect. I-CRR was announced as a temporary measure to absorb excess liquidity from the banking system.