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mediumMCQCompetitive Exam2026Economics
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If the Cash Reserve Ratio (CRR) is reduced by the RBI, its impact on credit creation will be to:

  1. A
    Increase it
  2. B
    Decrease it
  3. C
    Have no impact
  4. D
    None of the above

Solution & Step-by-step Explanation

A reduction in the Cash Reserve Ratio (CRR) means that commercial banks need to keep a lower volume of reserves as cash with the central bank. This releases additional lendable liquidity into the banking system, thereby increasing their capacity for credit creation.

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If the Cash Reserve Ratio (CRR) is reduced by the RBI, its impact on credit creation will be to:
A
Increase it
B
Decrease it
C
Have no impact
D
None of the above

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Monetary PolicyCash Reserve RatioMoney Supply

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