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Ans – (b) Explanation:- Total Deposits = Initial Deposits × 1/LRR Total Deposits = 3,000 × 1/25% Total Deposits = 3,000 × 4 Total Deposits = ₹ 12,000 Crores

Ans – (b) Explanation:- One of the Monetary policies practiced by the RBI is the Open Market operations. RBI has the right to sell and purchase of government securities to the public. By practicing it, RBI can control the money…

Ans – (a) Explanation:- The other name of Money Multiplier are: (i) Credit Multiplier (ii) Deposit Multiplier Money multiplier is the formula that calculates, how much money money a commercial bank can create. In this whole process, Money is created…

The other name of Legal Reserve Ratio are: 1. Reserve Deposit Ratio 2. Reserve Ratio (RR) Additional Information:- LRR is a very quick and direct method for controlling the credit-creating power of commercial banks. Commercial Banks are required to maintain…

Ans – (d) Explanation:- A fall in the repo rate decreases the cost of borrowing from the central bank. It encourages commercial banks to decrease their lending rates which encourages borrowers to take loans. It leads to the creation of…

Ans – (c) Solution:- Deposit Creation = Initial Deposit × 1/LRR ₹ 10,000 = Initial Deposit × 1/40% Initial Deposit = 10,000 × 40/100 Initial Deposit = 4,000 Crores

Ans – (d) Explanation:- Money or credit creation is one of the most important activities of commercial banks. Through the process of money creation, commercial banks are able to create credit, which is in far excess of the initial or…

Ans – (d) Explanation:- Statutory Liquidity Ratio (SLR): It refers to a 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 such…

Ans – (b) Explanation:- Repo (Repurchase 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…

Ans – (b) Explanation:- Through the process of money creation, commercial banks can create credit, which is in far excess of the initial or Primary Deposits. The deposits held by Banks are used for giving loans. Commercial banks grant loans…