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Define Or Explain the Following Concept. Clearing House System - Economics

Short Note

Define or Explain the following concept.

Clearing House System

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Solution

All the commercial banks are mandatorily required to keep a certain percentage of their deposits, other than cash reserve ratio (CRR), with the Central Bank. The Central Bank acts as a clearing house for the commercial banks. As a clearing house, it settles inter-bank claims and reduces the need for cash reserves by the commercial banks.

Concept: Central Bank Function - Banker's Bank
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APPEARS IN

Micheal Vaz Economics HSC 12th Standard Maharashtra State Board
Chapter 13 Central Banking
Exercise | Q 1.6 | Page 121
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