ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -8% of total rupee deposit liabilities. The Federal Reserve reduced reserve requirement ratios to 0% effective on March 26, 2020.

Detailed explanation-2: -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-3: -Reserve requirements are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals. Reserve requirements are a tool used by the central bank to increase or decrease the money supply in the economy and influence interest rates.

Detailed explanation-4: -The government introduced the reserve requirements to help protect depositors’ funds from being invested in risky investments. For example, if a person deposits $1, 000 in a bank account, the bank cannot lend out all the money. It is not required to keep all the deposits in the bank’s cash vault.