what is the role of cash reserve ratio in credit creation of Banks?
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Cash reserve ratio (CRR) is the necessary minimum percentage of a bank's total deposits which is to be kept with the Central Bank. ... When they hold a large portion of their deposits as CRR, it reduces the provision of credits to the public. This leads to a decline in the demand for loans and consumption expenditure.
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Solution. Cash reserve ratio (CRR) is the necessary minimum percentage of a bank's total deposits which is to be kept with the Central Bank. ... While they hold a less portion of their deposits as CRR, it increases the provisions of credit to the public. This in turn increases the supply of money in an economy.
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