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Cash Reserve Ratio - Meaning, Importance and Calculation

Last updated at Dec. 13, 2024 by Teachoo

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

View answer

Ans

c. Cash Reserve Ratio

Explanation

Cash Reserve Ratio is the percentage of bank deposits which is required to be kept by a commercial bank with Central Bank

It is the Ratio of Cash kept with Central Bank to Total Deposits.

CRR = CASH kept with Central Bank / Total Deposits of bank

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
  1. Economics Class 12
  2. Macroeconomics

    3. Chapter 3 Part 2 - Banking

    Chapter 4 Part 1 - AD,AS and Related Concepts →
Chapter 4 Part 1 - AD,AS and Related Concepts →
Economics Class 12
Macroeconomics

About the Author

Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years and a teacher from the past 18 years. He teaches Science, Economics, Accounting and English at Teachoo