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प्रश्न
Suppose in an economy, the initial deposit of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crore. Then the value of reserve requirements would be ______.
विकल्प
0.01
1
0.1
0.21
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उत्तर
Suppose in an economy, the initial deposit of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crore. Then the value of reserve requirements would be 0.1.
Explanation:
Money Multiplier = `1/"Reserve Ratio"`
Also, Money Multiplier = `"Total Deposits"/"Initial Deposit"`
Given:
Initial deposit = ₹400 crores
Total deposits = ₹4000 crores
Step 1: Calculate the Money Multiplier
Money Multiplier = `4000/400 = 10`
Step 2: Calculate the Reserve Requirement (Reserve Ratio)
Reserve Ratio = `1/"Money Multiplier" = 1/10 = 0.1`
संबंधित प्रश्न
Credit creation by commercial banks is determined by (Choose the correct alternative)
Explain the concept of ‘inflationary gap’. Also explain the role of ‘legal reserves’ in reducing it.
Define Credit Multiplier.
Credit creation by the commercial bank is determined by ______.
______ is the rate of interest charged by the central bank on loans given to the commercial bank.
Access to adequate and timely credit at affordable rates is critical for the rural poor to alleviate high cost debt and invest in livelihood opportunities. Despite the Government of India's best efforts, financial inclusion of the rural poor has been beset with multiple challenges. Lack of adequate banking infrastructure and human resources in rural areas, unplanned expansion leading to unviable bank branches and low levels of financial literacy amongst the rural populace have been some of the key challenges.
The most vulnerable communities, who often had no formal credit history or ability to provide collateral, have often been the worst affected. Inability to access loans from banks meant that the poorest had to resort to moneylenders for loans at unreasonably high rates of interest that invariably led them into a toxic debt trap.
In this context, the SHG-Bank Linkage programme, formalised by the National Bank for Agriculture and Rural Development (NABARD) in 1995, synthesizes 'formal financial systems' (in terms of a formal institution providing credit) with the 'informal sector' (comprising of rural poor with no formal credit history), has emerged as a preferred vehicle for providing financial services to the hitherto unbanked poor.
Community Based Repayment Mechanisms (CBRMs) have been institutionalised at branches involved in financing SHGs to monitor and ensure timely repayment of loans by SHGs. The number of SHGs with outstanding bank loans stands at nearly 5 million today, implying that the program has brought formal banking services to over 50 million women.
Why is it important to ensure access to cheap formal sector credit to the rural poor?
The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called ______.
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Credit Creation comes to an end when total cash reserves become equal to the initial deposits.
Reason (R): The value of money multiplier is determined by Legal Reserve Ratio (LRR).
Why are the banks required to keep only a fraction of deposits as cash reserves?
In the credit creation process, loans of one bank become ______.
