At a given cash reserve ratio of 50% with deposits of ₹1000, the amount which can be used to give loans by the bank.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹500
The Cash Reserve Ratio (CRR) is the percentage of total deposits that a bank is required to keep with the central bank (e.g., RBI) in the form of reserves. The remaining amount can be used for lending or investment.
Given:
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CRR = 50%
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Total deposits = ₹1000
Amount to be kept as reserve: 50% of ₹1000=₹500
Amount available for lending: ₹1000−₹500 = ₹500