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What is Cash Reserve Ratio - Teachoo.JPG

Question

Question 1

In the following questions, select the correct answers:

The ratio of total deposits that a commercial bank has to keep with RBI is called:

a. Statutory Liquidity Ratio

b. Deposit Ratio

c. Cash Reserve Ratio

d. Legal Reserve Ratio

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Transcript

What is Cash Reserve Ratio It is the Ratio of Cash kept with RBI to Total Deposits It Determines Percentage of bank deposits which is required to be kept by a commercial bank with RBI Example 1 Deposits of Bank =100 Amount to be kept with RBI =2 CRR=2/100=2% Money Available to give loans 100-2=98 Example 2 Deposits of Bank =100 Amount to be kept with RBI =2 CRR=3/100=3% Money Available to give loans 100-3=97 Higher the CRR, lesser amount is available to bank for loan Lower the CRR, More amount is available to bank for loan

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CA Maninder Singh is a Chartered Accountant for the past 12 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.