Define reserve deposit ratio.a.The percentage of total deposits held in reserves by commercial banks.b.Demand drafts holdings as a percentage of Treasury Bond holdingsc.The percentage of funds that the RBI loans to commercial banksd.The overall percentage of money commercial banks lend to their clients.
Question
Define reserve deposit ratio.a.The percentage of total deposits held in reserves by commercial banks.b.Demand drafts holdings as a percentage of Treasury Bond holdingsc.The percentage of funds that the RBI loans to commercial banksd.The overall percentage of money commercial banks lend to their clients.
Solution 1
The reserve deposit ratio is defined as the percentage of total deposits held in reserves by commercial banks. This is a requirement set by the central bank, which in India is the Reserve Bank of India (RBI). The purpose of this ratio is to ensure that the bank has enough reserves to meet the demand for withdrawals by its customers. The reserve deposit ratio is a key tool used by the central bank to control the money supply in the economy. The other options provided do not accurately define the reserve deposit ratio.
Solution 2
The reserve deposit ratio is defined as the percentage of total deposits held in reserves by commercial banks. This is a requirement set by the central bank, which in India is the Reserve Bank of India (RBI). The purpose of this ratio is to ensure that the bank has enough reserves to meet the demand for withdrawals from its customers. The reserve deposit ratio is a key tool used by the central bank to control the money supply in the economy. The other options provided do not accurately define the reserve deposit ratio.
Similar Questions
Fractional reserve banking is a term used to describe a banking system wherebyGroup of answer choicesindividual banks share a fraction of the total funds deposited in the whole banking system.banks are required to quote interest rates in fractions.banks holds reserves equal to only a fraction of their deposit liabilities.banks hold reserves equal to a multiple of their deposit liabilities; that is, fractional in this case really means multiple.banks are required to maintain a cartain fraction of their deposits in the form of checkable deposits, a certain fraction of their deposits in the form of savings deposits, etc.
In a fractional reserve banking system, assuming away various complexities such as taxes, imports, and cash savings, the simple deposit multiplier can be used to calculate the ratio of the amount of new deposits created by banks to the amount of new reserves.For example, if the reserve ratio was 20%, the simple deposit multiplier would be 5.If we were to have a 20% reserve ratio, but also incorporate the possibility that some proportion of spending is spent on imports, then the multiplier would
reserves are equal to deposits times the reserve requirement.
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What is the term for the minimum percentage of deposits that banks are required to maintain with the RBI as a part of their total deposits?
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