Consider the following statements regarding “Cash Reserve Ratio (CRR)”: 1. It is the share of a bank’s Net Demand and Time Liabilities (NDTL) that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash. 2. As per the RBI Act 1934, all Scheduled Commercial Banks are required to maintain the CRR. Which of the statements given above is/are correct? |ForumIAS

Q. Consider the following statements regarding “Cash Reserve Ratio (CRR)”:
1.It is the share of a bank’s Net Demand and Time Liabilities (NDTL) that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash.
2.As per the RBI Act 1934, all Scheduled Commercial Banks are required to maintain the 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: C

Notes:

Explanation: Cash Reserve Ratio (CRR): It is the share of a bank’s Net Demand and Time Liabilities (NDTL) that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash.

Net Demand and Time Liabilities (NDTL) shows the difference between the sum of demand and time liabilities (deposits) of a bank (with the public or the other bank) and the deposits in the form of assets held by the other bank.
As per the RBI Act 1934, all Scheduled Commercial Banks (that includes public and private sector banks, foreign banks, regional rural banks, and cooperative banks) are required to maintain the CRR.

Source: FORUMIAS

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