BANKING AFFAIRS

Detailed explanation-1: -Reserve money is also called central bank money, monetary base, base money, or high-powered money. It is the base level for the money supply or the high-powered component of the money supply. In the most simple language, Reserve Money is Currency in Circulation plus Deposits of Commercial Banks with RBI.

Detailed explanation-2: -A monetary reserve is the holdings of currencies, precious metals, and other highly liquid assets used to redeem national currencies and bank deposits and to meet current and near-term financial obligations by a country’s central bank, government treasury, or other monetary authority.

Detailed explanation-3: -High powered money consists of currency and coins held by the public and deposits held by government and commercial banks. High powered money is a total liability of the monetary authority of the country.

Detailed explanation-4: -What Are Bank Reserves? Bank reserves are the cash minimums that financial institutions must have on hand in order to meet central bank requirements. This is real paper money that must be kept by the bank in a vault on-site or held in its account at the central bank.

Detailed explanation-5: -Reserve money (M0) = Currency in Circulation + Bankers’ Deposits with RBI + ‘Other’ Deposits with RBI. Among these components, the most important one is currency in circulation. It includes notes in circulation, rupee coins and small coins.