Module: | Priority Sector, Consumer Protection & Digital Lending
Q64: Evaluate the following statements regarding 'Incremental CRR' (I-CRR):
1. I-CRR is a temporary measure used by RBI to drain excess liquidity from the system during specific periods (e.g., demonetization).
2. Balances maintained under I-CRR are always eligible for interest payments from the RBI.
2. Balances maintained under I-CRR are always eligible for interest payments from the RBI.
✅ Correct Answer: A
The correct answer is A. Statement 1 is True: I-CRR is an ad-hoc, temporary tool deployed by the RBI to absorb sudden, extraordinary surges in systemic liquidity, famously used during the 2016 demonetization and the 2023 withdrawal of ₹2000 notes.
Statement 2 is False: Just like the standard CRR, balances maintained under the I-CRR mandate do not earn any interest from the RBI.
It acts purely as a liquidity-draining mechanism without offering any yield to the commercial banks.
Statement 2 is False: Just like the standard CRR, balances maintained under the I-CRR mandate do not earn any interest from the RBI.
It acts purely as a liquidity-draining mechanism without offering any yield to the commercial banks.