Question

When the cash reserve ratio (crr) is increased by the rbi, it will decrease

Answer 1

Now suppose that the RBI increasesthe CRR to 5%. Then the amount to be held by the bank will be Rs.5. Hence, the availability of the cash to lend will decrease. Increase in CRR leads toless amount of availability of money tocirculate in the economy which leadsto less liquidity.

Answer 2

Now suppose that the RBI increasesthe CRR to 5%. Then the amount to be held by the bank will be Rs.5. Hence, the availability of the cash to lend will decrease. Increase in CRR leads toless amount of availability of money tocirculate in the economy which leadsto less liquidity.