A) increase
B) decrease
C) does not change
D) first decreases than increases
Correct Answer: A
Solution :
The Cash Reserve Ratio is the amount of funds that the banks are bound to keep with Reserve bank of India as a portion of their Net Demand and Time Liabilities (NDTL). When CRR is reduced, more funds are available to banks for deploying in other businesses because they need to keep fewer amounts with RBI. This leads to increase in credit creation.
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