With reference to the RBI's monetary policy tools, consider the following statements: 1. A reduction in the Cash Reserve Ratio (CRR) increases the lending capacity of commercial banks. 2. A neutral monetary policy stance implies that the RBI is committed to only lowering interest rates in future meetings. Which of the statements given above is/are correct?

Question

Accepted Answer

A. 1 only — Statement 1 is correct as lowering the CRR reduces the portion of deposits banks must park with the RBI, freeing up capital for lending. Statement 2 is incorrect because a neutral stance gives the RBI flexibility to move rates in either direction based on emerging macroeconomic data.

RBI Reduces Repo Rate to 5.50%

CAPFs (General Administration) Bill, 2026