Which of the following rate is decided by the Reserve Bank of India(RBI), is called "Policy Rate"?A. Cash reserve ratio.
Cash reserve ratio (CRR) is the funds that all the scheduled bank have to maintain with the Reserve Bank of India(RBI), the supreme banking authority of India. By increasing the CRR RBI drain out excessive funds from the scheduled banks.
Example: Suppose the CRR is 5%. A person/customer open a Savings bank account with Rs. 10,000 in State Bank of India. So now State Bank of India has to park Rs. 500 to the Reserve Bank of India (RBI) as per the CRR rate.
5% of 10,000 = 500 (CRR= 5%).