Consider the following statements and identify the right ones. i. Deposits are created by banks and financial institutions. Ii. They constitute the major source of money supply in India.

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	I only
B	II only
C	Both
D	none

Explanation:

Detailed explanation-1: -M4. M4 is the widest measure of money supply that the RBI uses. It includes all the aspects of M3 and also includes the savings of the post office banks of the country.

Detailed explanation-2: -The Behaviour of Commercial Banks By creating credit, the commercial banks determine the total amount of nominal demand deposits. The behaviour of the commercial banks in the economy is reflected in the ratio of their cash reserves to deposits known as the ‘reserve ratio’.

Detailed explanation-3: -Money Supply-Its Main Components Coins (standard money): paper currency and demand deposits or credit money issued by commercial banks are the key components of the supply of money: The word “Monetary Standard” refers to the sort of standard money that is utilized in a monetary system.

Detailed explanation-4: -L1 = NM3 + All deposits with the post office savings banks (excluding National Savings Certificates). L2 = L1 +Term deposits with term lending institutions and refinancing institutions (FIs) + Term borrowing by FIs + Certificates of deposit issued by FIs. L3 = L2 + Public deposits of non-banking financial companies.

There is 1 question to complete.