Multiple choice

A cut in CRR ratio by RBI means

  1. a down trend in exports

  2. To reduce liquidity in the system

  3. To increase the liquidity in the system

  4. To increase exports

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When RBI cuts the Cash Reserve Ratio (CRR), banks are required to keep less cash with the central bank, thereby increasing the amount of money available for lending. This increases liquidity in the banking system. CRR cuts are not directly related to exports - they are monetary policy tools to control money supply.