Question

If inflation to be combated, the RBI *

1 point

A. raises SLR and lowers CRR

B. lower SLR and raises CRR

C. raises both CRR and SLR

D. none​

Answer 1

D.none

Explanation:

it is correct answer please like

Answer 2

Raises both CRR and SLR

If inflation to be combated, the RBI raises both CRR and SLR

The Cash Reserves Ratio (CRR)

• The Cash Reserves Ratio (CRR) is the percentage of commercial banks' total deposits that they must retain as cash reserves with the central bank.
• By increasing the cash reserve ratio, commercial banks must keep more cash with the central bank, reducing their credit creation capacity and, as a result, money supply in the economy decreases, correcting the inflationary situation.
• Conversely, by decreasing the cash reserve ratio, commercial banks must keep less cash with the central bank, increasing their credit creation capacity and, as a result, money supply in the economy increases, correcting the deflatory situation.

The statutory liquidity ratio (SLR)

• The statutory liquidity ratio (SLR) refers to the amount of liquid assets, such as cash, that commercial banks must keep on hand on a daily basis as a percentage of their total deposits.
• By increasing the statutory liquidity ratio, commercial banks must keep more cash on hand, reducing their credit creation capacity and, as a result, the money supply in the economy falls, correcting the inflationary situation.
• Conversely, by lowering the statutory liquidity ratio, commercial banks must keep less cash on hand, increasing their credit creation capacity and, as a result, the money supply in the economy rises, correcting the deflationary situation.

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