Multiple choice

Which of the following statements are correct regarding the cash reserve that is maintained by banks with RBI u/s 42 of RBI Act?

(a) It is called cash reserve ratio. (b) It is maintained at minimum of 3% and maximum of 20% of NDTLs. (c) No interest is paid by RBI on this amount. (d) It is maintained as a fortnightly average balance with RBI.

  1. Only (a), (c) and (d)

  2. Only (a), (b) and (c)

  3. Only (a), (b) and (d)

  4. All of the above
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A Correct answer
Explanation

Section 42 in Reserve Bank of India Act, 1934 regarding cash reserves of scheduled banks to be kept with RBI. (1) Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less than such percent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section. (2) The Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India.

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