Which of the following statements is correct regarding the bank reserves?
I. These reserves are kept partly as cash and partly in the form of financial instruments.
II. Cash Reserves Ratio is the deposits that commercial banks keep with the Reserve Bank of India.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Both I and II.
I. Bank reserves are held partly as cash in hand and partly in the form of financial instruments such as government securities. These are maintained to meet regulatory requirements and ensure liquidity.
II. The Cash Reserve Ratio (CRR) refers to the portion of deposits that commercial banks are mandatorily required to keep with the Reserve Bank of India (RBI). It is a tool used by the RBI to regulate liquidity and control inflation in the economy.