Commercial Applications
Which of the following is/are correct statement(s)?
Statement 1: The Central Bank can influence the country's economy by adjusting the Cash Reserve Ratio (CRR).
Statement 2: Commercial banks can issue currency notes as long as they meet the reserve requirements set by the Central Bank.
- Only Statement 1 is true
- Only Statement 2 is true
- Both statements are true
- Both statements are false
Banking
1 Like
Answer
Only Statement 1 is true
Reason — Statement 1 is TRUE — CRR is a quantitative tool of credit control. An increase in CRR reduces the credit-granting capacity of commercial banks, while a decrease expands it; thereby influencing money supply in the economy. Statement 2 is FALSE — only the central bank has the monopoly over issue of currency notes. Commercial banks cannot issue notes under any circumstances.
Answered By
2 Likes
Related Questions
It carries out the country's monetary policy.
- Commercial Bank
- Central Bank
- Specialised Bank
- None of these
…………… is the apex institution of the country's monetary and banking structure where as …………… is one of the organs of the money market.
- Commercial Bank, central bank
- Central Bank, commercial bank
- Specialised Bank, central bank
- Commercial bank, specialised bank
A bank draft is always dishonoured if there are insufficient funds in the drawer's account at the time of encashment.
- True
- False
If the central bank decides to promote economic growth by lowering the bank rate, which of the following is a likely consequence for commercial banks?
- They will increase interest rates on loans to maintain profitability.
- They will decrease their lending activity to reduce risks.
- They will expand their lending activities due to lower borrowing costs.
- They will raise the Cash Reserve Ratio to align with central bank policies.