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Ans – (d) The process of credit creation comes to an end when the cash reserves of the commercial bank become equal to the initial deposits. Explanation:- Let us now understand the process of Money Creation through an example: Suppose,…
Ans – (c) Explanation:- We have seen that new deposits in banks lead to the creation of more deposits by banks. Total deposits created are many times the initial deposits. The multiple by which deposits can increase due to an…
Ans – (c) Explanation:- One of the tools of monetary policy is the ‘Open Market Operations’ The central bank is authorized to sell the government securities to the public. When it buys the government securities from the public, against money.…
Ans – (d) Explanation:- Credit creation is determined by initial deposits and LRR (Legal Reserve Ratio) The legal Reserve Ratio consists of two components: 1. Cash Reserve Ratio (CRR) 2. Statutory Liquidity Ratio (SLR) For example Initial Deposits = ₹…
Ans – (b) Explanation:- Margin requirements is a qualitative method as it does not regulate the total volume of credit. It is specific in nature as it affects the flow of credit for a particular use. Thus qualitative methods of…
Ans – (b) Explanation:- Repo Rate:- The repo rate is the rate at which the central bank of a country (RBI in the case of India) lends money to commercial banks to meet their short-term needs. The central bank advances…
Ans – (b) Explanation:- Saving account and current account deposits are demand deposits as the account holder can withdraw money when needed (demanded) The account holder is issued a cheque book. With the help of this cheque book, he can…
Ans (a) Explanation:- (1) If the Reserve Bank of India injects more money into circulation, it will increase the cash reserve of the commercial bank. Now the commercial bank will be able to create more credit and it will increase…
Ans – (c) Explanation:- As per section 22 of the Reserve Bank of India Act, the Reserve Bank of India has the sole right to issue currency notes of different denominations except 1 rupee note. The One Rupee note is…
Ans (b) Explanation:- Statutory Liquidity Ratio (SLR): It refers to the minimum percentage of net demand and time liabilities that commercial banks are required to maintain with themselves. SLR is maintained in the form of designated liquid assets.