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The Cash Reserve Ratio is the percentage of a bank's deposits that it must hold as
Aforeign currency
Bcash reserves
Cloans to industry
Dgovernment bonds
Answer & Solution
Correct answer: B. cash reserves
1. The RBI caps credit creation by fixing a minimum reserve.
2. CRR is the share of deposits a bank must keep as **cash reserves**.
3. With a CRR of 20 per cent, deposits of Rs 100 require Rs 20 held back, leaving Rs 80 to lend.
4. Holding government securities is the SLR requirement, which is a separate rule.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.3.2 Limits to Credit Creation and Money Multiplier_
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