Q. Consider the following statements about Cash Reserve Ratio (CRR):
1.CRR is the percentage of total deposits of a bank that must be maintained in cash with the Reserve Bank of India.
2.The RBI pays interest on the amount maintained by banks as CRR.
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:

  • CRR is the cash percentage of a bank’s total deposits that must be kept with the RBI.
  • The RBI does not pay any interest on the CRR balances maintained by banks.

Source: Indian Economy (Ramesh Singh)

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