ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It is not required to keep all the deposits in the bank’s cash vault. Instead, banks are required to keep 10% of the deposits, i.e., $100, as reserves, and may lend out the other $900. The Federal Reserve sets the reserve requirement as one of the tools for guiding monetary policy.

Detailed explanation-2: -The Federal Reserve’s Reserve Requirement is essential for the stability of our economy as well as the financial security of individuals, families, businesses and financial institutions.

Detailed explanation-3: -Reserve Ratio Guidelines Banks with more than $124.2 million in net transaction accounts were required to maintain a reserve of 10% of net transaction accounts. Banks with more than $16.3 million to $124.2 million needed to reserve 3% of net transaction accounts.

Detailed explanation-4: -The reserve requirement exemption amount will be set at $36.1 million, up from $32.4 million in 2022, and the low reserve tranche will be set at $691.7 million, up from $640.6 million in 2022. The adjustments to both of these amounts are derived using formulas specified in the Federal Reserve Act.

Detailed explanation-5: -All Scheduled Commercial Banks are at present required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) of 5.00 per cent of the Net Demand and Time Liabilities (NDTL) (excluding liabilities subject to zero CRR prescriptions) under Section 42(1) of the Reserve Bank of India Act, 1934.