Student Community
Answer
True, The purchase of securities decreases the reserves of commercial banks, which reduces their credit-creating power. Explanation:- When commercial banks purchase securities from the public, The public withdraws their money from the deposits. It decreases the cash reserves with the…
False, A financial institution can be a banking institution only when it performs the functions of accepting deposits and advancing loans. Additional Information:- The main function of commercial banks is to accept deposits and advance loans. A financial institution can…
False, Commercial banks contribute to quantum of money supply in the economy through credit creation. Additional Information:- However, commercial banks do not issue notes and currency, yet they contribute to the money supply. It is done through credit creation. The…
True, Explanation:- An increase in the cash reserve ratio reduces the excess reserves of commercial banks and limits their credit-creating power. Additional Information:- Cash Reserve Ratio (CRR): It refers to the minimum percentage of net demand and time liabilities, to…
Loans offered by commercial banks increase (increase/decrease) the money supply in the economy. Explanation:- commercial banks offer loans to others from the cash reserves created by initial deposits by the public. The amount of such a loan is provided to…
Reserve Bank of India (RBI) is the agent and advisor to the Government of India. Explanation:- One of the functions of the Central Bank is the Bank to the government. Banker to the Government:- The Reserve Bank of India acts…
Primary Deposits + Secondary Deposits = Demand Deposits of the Commercial Banks. Explanation:- Primary Deposits are the cash deposits of people with Commercial Banks in different deposit accounts such as savings accounts, current accounts, term deposit accounts, and other deposits. On the other hand, Secondary or Derivative…
Secondary or Derivative Deposits are those deposits which arise due to loans given by the banks to the people. Explanation:- Primary Deposits are the cash deposits of people with Commercial Banks in different deposit accounts such as savings accounts, current accounts, term deposit accounts,…
Cash deposits with the Commercial Banks are Primary (Primary/Secondary) Deposits. Explanation:- Primary Deposits are the cash deposits of people with Commercial Banks in different deposit accounts such as savings accounts, current accounts, term deposit accounts, and other deposits. On the…
If Legal Reserve Ratio is 25%, then value of credit multiplier would be 4. Explanation:- Credit Multiplier = 1/LRR Credit Multiplier = 1/25% Credit Multiplier = 4 times