Increase in CRR means reducing lending capacity of banks bcoz banks have to park more liquidity with RBI so they remain with less money to lend customers, this affects the rate of interest.
Arjun · 9d ago
@The_hitman However, if liquidity is already abundant or banks absorb the cost through lower margins, the pass-through to borrowers may be limited. The impact is therefore conditional, not one-to-one.
The_Hitman · 9d ago
Increase in CRR means reducing lending capacity of banks bcoz banks have to park more liquidity with RBI so they remain with less money to lend customers, this affects the rate of interest.
Arjun · 9d ago
@The_hitman However, if liquidity is already abundant or banks absorb the cost through lower margins, the pass-through to borrowers may be limited. The impact is therefore conditional, not one-to-one.