Question

state the impact of an increase in cash reserve ratio on lonable funds​

Answer 1

Answer:

The Cash Reserve Ratio in India is decided by RBI’s Monetary Policy Committee in the periodic Monetary and Credit Policy. The Reserve Bank of India takes stock of the CRR in every monetary policy review, which, at present, is conducted every six weeks. CRR is one of the major weapons in the RBI’s arsenal that allows it to maintain a desired level of inflation, control the money supply, and also liquidity in the economy.

Explanation:

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Answer 2

Answer:

The higher the CRR , the lower Is the liquidity with the banks and vice - versa ...For this RBI increases the CRR ,lowering the lonable funds available with the banks .This in, turn, slows down investment and reduces the supply of money in the economy. As a result, the growth of the economy is negatively impacted.

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