| 1. The RBI varies Cash Reserve Ratio to change the liquidity of market |
| 2. CRR is subject to frequent changes as RBI intervenes from time to time to correct monetary or exchange rate imbalances |
| 3. CRR currently is 4% |
| 4. RBI is empowered to fix the CRR at a rate ranging between three per cent and 15 per cent |
A) 1 only
B) 1 and 2
C) 3 only
D) 1, 2, 3 and 4
Correct Answer: D
Solution :
Every commercial bank is required to keep a certain percentage of its demand and time liabilities (deposits) with the RBI (either as cash or book balance). The RBI varies this ratio to change the liquidity of market. RBI is empowered to fix the CRR at a rate ranging between three per cent and 15 per cent. Like the Bank Rate, CRR is also subject to frequent changes as RBI intervenes from time to time to correct monetary or exchange rate imbalances. This ratio, currently, is 4%
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