BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An inflow of cash
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A decrease in loans
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An increase in security holdings
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The chasing of a cheque by an individual or a firm.
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Detailed explanation-1: -The loan-to-deposit ratio (LDR) is used to assess a bank’s liquidity by comparing a bank’s total loans to its total deposits for the same period. The LDR is expressed as a percentage. If the ratio is too high, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements.
Detailed explanation-2: -Effect of Decrease in Cash Reserve Ratio Effect on inflation: When the cash reserve ratio is minimised, commercial banks will have more funds and hence, the money supply of the banking system will increase. When there is a rise in the money supply, excessive funds will result in high inflation.
Detailed explanation-3: -The assets are items that the bank owns. This includes loans, securities, and reserves. Liabilities are items that the bank owes to someone else, including deposits and bank borrowing from other institutions.
Detailed explanation-4: -transmission mechanism, through which central banks, by increasing or reducing banks’ borrowing costs, can accelerate or slow down economic growth. As large volumes of bad loans limit banks’ lending, they also reduce the ability of central banks to influence the economy.