Q. With reference to the monetary policy tools of the Reserve Bank of India (RBI), consider the following statements:
1.Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are quantitative tools used by the RBI to manage liquidity in the economy.
2.A decrease in CRR injects liquidity into the banking system by increasing the lendable resources of commercial banks.
3.SLR is maintained by banks in the form of cash reserves held with the RBI.
Which of the statements given above is/are correct?
Answer: A
Notes:
Explanation:
- CRR and SLR are quantitative tools used by the RBI to control the money supply and liquidity.
- A reduction in CRR allows banks to keep less cash with the RBI, increasing their capacity to lend, thereby injecting more liquidity into the economy.
- SLR is not maintained as cash with the RBI. It is maintained by the banks with themselves in the form of approved securities (like G-Secs), gold, or cash (but held internally, not with RBI).
Source– 11th NCERT: Economics: Indian Economic Development and TMH Indian Economy by Ramesh Singh
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