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General Knowledge
As reported in various newspapers many banks have revised their interest rates on home loans, car loans and other such loans. Which of the following phenomenon promted these banks to make such an upward revision in their interest rates?(1) RBI has revised the CRR and other such rates upwardly which has created a liquidity crunch in the market.
(2) Stock markets in the country are showing very high fluctuations as visible through their indexes.As a result banks have lost a huge amount of money in trading. Banks now want to recover that money by increasing their interest rates.
(3) Banks are in need of a huge amount of money, as they have to give revised pay to all its employees.
When the RBI increases the Cash Reserve Ratio (CRR), banks are required to keep more cash with the central bank, which reduces the liquidity available for lending, thereby prompting banks to increase interest rates.