Question

Why is reserve keeping with the RBI costly for commercial banks?​

Answer 1

Answer:

This is because commercial banks need to keep this ratio of funds with the Reserve Bank of India without earning any interest on these funds. The money is kept for fr.ee. The CRR is computed as a percentage of the net demand and time liabilities (NDTL) of each bank.

Explanation:

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Answer 2

Answer:

When the cash reserve ratio is decreased by the RBI, banks will have more money to invest in other businesses since the amount of funds that needs to be kept with the RBI is low. ... When there is a rise in the money supply, excessive funds will result in high inflation.

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