Q1. If CRR is scrapped as a legal requirement, do you think the banks can create unlimited amount of money supply?
Q2. Imagine yourself as the RBI governor, how would you use the tool of CRR to increase the investment in the economy?
Q3. In the present scenario, when industrial growth is low, do you think a cut in the repo-rate by the RBI would accelerate the pace of industrial growth?
Q4. Why do you say that commercial banks create money, while we also say that central bank has the soul right to issue currency? Explain what is the likely impact of money creation by the commercial bank on the national income.

Dear Student, Answer to your question is as follows : Answer 1. CRR refers to the minimum portion of the total deposits that the commercial banks has to maintain with the central bank in the form of reserves. So, unlimted amount of money supply will not be created because CRR amount is fixed that is to be kept by commercial banks. Answer 3. Repo rate refers to the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation.  Cutting repo rate would have impact on the whole economy. To increase the industrial growth, increasing repo rate will not have overall impact on industrial economy. Rationing credit will have more impact on the industrial growth. (Note : Students are advised to ask different questions in different threads) Regards