Credit creation by commercial banks is determined by a)CRR B)Initial deposits C) SLR D) All the above
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Among CRR, initial deposits, SLR and all of the above, credit creation by commercial banks is determined by CRR or Cash Reserve Ratio.
CRR refers to the sum of funds which banks need to maintain all the time with the RBI or Reserve Bank of India.
The higher the rate of CRR with RBI, the lower will the system liquidity be and also, vice versa.
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Answer:
D
Explanation:
The credit creation by commercial banks is affected by all the alternatives given in the question
As
total credit created =[1/(CRR+SLR)]*initial deposits
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