Question

Identify the incorrect statement with reference to Cash Reserve Ratio (CRR):

• A. It is a certain percentage of demand and time deposit liabilities that every bank must keep as cash reserves with the Central Bank.
• B. It is fixed by the Central Bank.
• C. It is not binding on the commercial banks.
• D. It is a tool used by the Central Bank to control the credit creation in the economy.

Hint:

CRR is a mandatory monetary tool used by the Central Bank to regulate liquidity and credit in the economy.

Answer 1

The Correct Option is C

CRR is mandatory for all commercial banks as prescribed by the Central Bank. Option (C) is incorrect because it suggests that CRR is not binding, which is false.