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प्रश्न
Why are the banks required to keep only a fraction of deposits as cash reserves?
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उत्तर
There are two reasons:
- Not all depositors approach the banks for withdrawal of money at the same time, and also that normally they withdraw a fraction of deposits.
- There is a constant flow of new deposits into the banks.
Therefore, to meet the daily demand for withdrawal of cash, it is sufficient for banks to keep only a fraction of deposits as cash reserves.
संबंधित प्रश्न
Credit creation by commercial banks is determined by (Choose the correct alternative)
Explain the credit creation role of commercial banks with the help of a numerical example.
Define Credit Multiplier.
Banks are able to create credit many times more than initial deposits through ______.
______ is the rate of interest charged by the central bank on loans given to the commercial bank.
Match the following:
| Column I | Column II | ||
| A. | Primary deposits | (i) | Payable on demand |
| B. | Derivative deposits | (ii) | Deposits for a fixed period of time |
| C. | Demand deposits | (iii) | Cash deposits of people |
| D. | Term deposits | (iv) | Deposits created by banks (or loan deposits) |
What is meant by credit creation?
Explain briefly the process of credit creation by commercial banks.
What is meant by primary deposits?
The key assumption for perfect credit creation is ______.
