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प्रश्न
Explain the role of Cash Reserve Ratio in controlling credit creation.
Briefly examine the CRR role in credit control.
उत्तर
Cash reserve ratio (CRR) is the necessary minimum percentage of a bank’s total deposits which is to be kept with the Central Bank. Commercial banks need to maintain with the Central Bank a certain percentage of their deposits in the form of cash reserves. The Central Bank can vary CRR between 3% and 15%. When they hold a large portion of their deposits as CRR, it reduces the provision of credits to the public. This leads to a decline in the demand for loans and consumption expenditure. Thus, it leads to a fall in the supply of money. While they hold a smaller portion of their deposits as CRR, it increases the provisions of credit to the public. This in turn increases the supply of money in an economy.
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संबंधित प्रश्न
Explain how controlling money supply is helpful in reducing excess demand.
Define cash reserve ratio.
The ratio of total deposit that a commercial bank has to keep with the Reserve Bank of India is called ______.
Ms. Sakshi, an economics teacher, was explaining the concept of ‘minimum percentage of the total deposits to be kept by any commercial bank with the Central Bank of the country, as per norms and statute prevailing in the country. From the following, choose the correct alternative which specifies the concept explained by her?
State and discuss any two monetary tools to control inflationary pressures in the economy.
