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What will happen if the RBI eliminates the cash reserve ratio?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Pinky asked about 3 years ago

What will happen if the RBI eliminates the cash reserve ratio?

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2 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

**ELIMINATION OF CASH RESERVE RATIO** Cash Reserve ratio means the funds which other banks have to keep with RBI The intention for this is to help the banks when they have to meet the urgent demand from bank customers The extra money in the economy is taken out through this method so if this is eliminated banks will have lot of money to lend to people and this will disturb economy in various ways .. If CRR is removed the country will suffer during the time of inflation because there is no maintainence of cash flow in the market Thanks :)

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Data?1494421738 samkit kothari answered about 3 years ago

if RBi eliminates the CRR then bank will not have to retain a amount of money with RBi. then in that case to increase the business bank will try to lend more and more and money and because of that it will impact on economy of the country as more and more money has came in the market and ultimately the value of Rupee will go down .

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