Explanation

An increase in the Cash Reserve Ratio drains liquidity from the banking system because banks must park a larger share of deposits with the RBI, reducing the funds available for lending — so statement 1 is correct. The Statutory Liquidity Ratio is the share of deposits banks must hold in liquid assets such as government securities; it is not the ratio of cash reserves to total assets (option A) nor the rate at which the RBI lends to banks (option C, which is the repo/bank rate). With only statement 1 correct, the answer is B.