Economics · Monetary Policy
With reference to liquidity conditions in the banking system, consider the following statements: Statement I: A reduction in the Cash Reserve Ratio (CRR) by the Reserve Bank of India increases the lendable resources available with commercial banks. Statement II: A liquidity deficit necessarily implies that banks possess surplus funds but are completely unwilling to extend credit. Which one of the following is correct in respect of the above statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Statement I is correct but Statement II is incorrect✓
- 2Both Statement I and Statement II are correct and Statement II explains Statement I
- 3Both Statement I and Statement II are correct but Statement II does not explain Statement I
- 4Statement I is incorrect but Statement II is correct
Correct answer
Statement I is correct but Statement II is incorrect
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