What is cash reserve ratio?

Correct option is D

Thecorrect answer is (D). The minimum amount of deposit that the commercial banks have to hold as reserves with the RBI.

Cash Reserve Ratio (CRR) is the percentage of total deposits that commercial banks are legally required to maintain as reserves with the Reserve Bank of India (RBI).

Here's a breakdown:

• Purpose: CRR is a crucial monetary policy tool used by the RBI to control the money supply and inflation in the economy.
• How it works: When the RBI increases the CRR, banks have less money available to lend out, which reduces the overall money supply in the economy. Conversely, a decrease in CRR allows banks to lend more, increasing the money supply.
• Impact: CRR has a significant impact on credit creation and interest rates in the economy.