ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fractional Reserve Banking
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Legal Reserves
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Fiscal
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Reserve system
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Detailed explanation-1: -Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash. Click here to know about SLR & Repo Rate. Current cash reserve ratio is at 4%, this will be changed to 4.5% from May 21st.
Detailed explanation-2: -Fractional reserve banking is a system in which only a fraction of bank deposits are required to be available for withdrawal. Banks only need to keep a specific amount of cash on hand and can create loans from the money you deposit. Fractional reserves work to expand the economy by freeing capital for lending.
Detailed explanation-3: -The fractional reserve banking system legally permits banks to hold less than 100% of their deposits as a reserve.
Detailed explanation-4: -Net transaction account balances above the low reserve tranche were subject to a reserve requirement ratio of 10 percent.