BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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proportion of cash and security reserves the bank needs to hold.
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fraction of deposits that the bank is required to hold.
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loan to deposit ratio in the bank’s balance sheet.
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money belonging to the bank’s largest depositors.
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Detailed explanation-1: -Cash reserve Ration (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank of a country.
Detailed explanation-2: -The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country’s central bank, which in the United States is the Federal Reserve. It is also known as the cash reserve ratio.
Detailed explanation-3: -What is the Reserve Ratio? The reserve ratio – also known as bank reserve ratio, bank reserve requirement, or cash reserve ratio – is the percentage of deposits a financial institution must hold in reserve as cash. The central bank is the institution that determines the required amount of reserve ratio.
Detailed explanation-4: -The Federal Reserve requires banks and other depository institutions to hold a minimum level of reserves against their liabilities. Currently, the marginal reserve requirement equals 10 percent of a bank’s demand and checking deposits.
Detailed explanation-5: -A fractional reserve banking system is a banking system in which banks keep a part of client deposits as reserves while using the remainder to make loans to other customers. The reserve requirement ratio is the portion of client deposits banks must keep in their reserves.