Economic Awareness - Sectors of Indian Economy
Which of the following is NOT an effect of increasing the Cash Reserve Ratio (CRR) by RBI?
Which of the following is NOT an effect of increasing the Cash Reserve Ratio (CRR) by RBI?
medium Q8 of 15
Step-by-Step Solution
Step 1: Understand CRR impact
Increasing CRR means banks must keep more funds with RBI, reducing money available for lending.Step 2: Analyze effects
Higher CRR reduces money supply, decreases liquidity, and helps control inflation by restricting credit.Step 3: Identify incorrect effect
Increasing CRR does not increase bank lending capacity; it reduces it.Final Answer:
Increase in bank lending capacity → Option CQuick Check:
Increasing CRR = Reduces lending capacity ✅
Quick Trick: Higher CRR restricts bank credit, controlling inflation
Common Mistakes:
- Assuming higher CRR increases lending capacity
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