......Higher the CRR ratio, lesser will be the available funds with the banks, hence the banks will start increasing the offering rates on the fixed deposits to mobilise capital, which in turn will have an effect on the lending rates. Then why does RBI increase the CRR rates? With excess money at its disposal, due to lower CRR rates, banks will start running larger loan books which could increase the default rates (NPA). To curb such instincts, the RBI puts a leash by increasing the CRR.......
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