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Q76 (IAS/1998) Economy › Money, Banking & Inflation › Monetary policy tools Answer Verified

The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called

Result
Your answer: —  Â·  Correct: B
Explanation

The ratio that requires banks to hold a portion of deposits as cash reserves is the Cash Reserve Ratio (CRR). CRR mandates that banks keep a specified percentage of deposits as cash with the central bank (e.g., CRR = 20% means Rs.20 of Rs.100 deposits must be held as cash reserves) [1]. CRR is maintained in cash with the RBI, whereas the Statutory Liquidity Ratio (SLR) is a separate requirement held by banks themselves in cash, gold or government securities and is therefore not identical to CRR [2]. Because CRR (the precise term) is not among the provided options, SLR (option 2) is the closest related choice; this discrepancy warrants manual review.

Sources

  1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 3: Money and Banking > Cash Reserve Ratio (CRR) = Percentage of deposits which a bank must keep as cash reserves with the bank. > p. 40
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > CASH RESERVE RATIO (CRR) vs STATUTORY LIQUIDITY RATIO (SLR) > p. 170
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SIMILAR QUESTIONS

CDS-I · 2010 · Q75 Relevance score: 1.80

Consider the following statements with regard to Statutory Liquidity Ratio (SLR): 1. To meet SLR, commercial banks can use cash only. 2. SLR is maintained by the banks with themselves. 3. SLR restricts the banks' leverage in pumping more money into the economy. Which of the statements given above is/are correct ?

CDS-I · 2020 · Q92 Relevance score: 1.79

The Cash Reserve Ratio refers to

IAS · 2014 · Q33 Relevance score: -0.30

In the context of Indian economy, which of the following is/are the purpose/purposes of 'Statutory Reserve Requirements'? 1. To enable the Central Bank to control the amount of advances the banks can create 2. To make the people's deposits with banks safe and liquid 3. To prevent the commercial banks from making excessive profits 4. To force the banks to have sufficient vault cash to meet their day-to-day requirements Select the correct answer using the code given below.

IAS · 2018 · Q16 Relevance score: -0.59

Consider the following statements : 1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues. 2. CAR is decided by each individual bank. Which of the statements given above is/are correct ?

CDS-II · 2016 · Q89 Relevance score: -2.41

Which of the following with regard to the term T^ank run’ is correct?