Multiple choice

Which of the following is used by RBI to reduce liquidity for purposes of controlling inflation?

  1. Forex Rate

  2. Bank Rate

  3. Interest rates

  4. CRR

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

The Cash Reserve Ratio (CRR) is the percentage of total deposits that banks must keep as cash reserves with the RBI. Increasing CRR reduces the money available for lending, thus reducing liquidity.