Question

Which of the following measure absorb liquidity from the financial system

Answer 1

Answer:

Cash reserve ratio (CRR)

CRR is the percentage of a bank's time and demand liabilities that needs to be kept as cash with RBI. It is one of the tools that the central bank uses to control the total liquidity in the banking system

Answer 2

Answer:

CCR ( Cash Reserve Ratio) absorb liquidity from the financial system.

Explanation:

• The required cash reserve ratio (CRR) is the portion of a bank's time and demand obligations that must be held with the RBI.
• It is a technique the central bank employs to regulate the overall liquidity of the banking sector.
• The CRR is at 4% at the moment. A high CRR limits banks' ability to lend, which reduces liquidity. Conversely, a low CRR causes this.
• The incremental CRR has been set at 100% because the current liquidity situation is one of extreme excess.
• Usually, this aids in controlling daily excess liquidity.
• Through this tool, banks can get interest on their extra cash from the RBI in exchange for government assets.
• assets. Currently, the RBI is paying interest on this transaction at the rate of 5.75 %

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