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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
Commercial Banks earn interest from lending money, So, they want to lend the maximum possible amount. However, there is a limit to credit creation by banks and this is determined by Legal Reserve Ratio, which is fixed by Central Bank.…
In the present COVID-19 times, many economists have raised their concerns that Indian economy may have to face a deflationary situation, due to reduced economic activities in the country. Suppose you are a member of the high powered committee constituted…
Value of Money Multiplier decreases (increases/decreases/remains unchanged) with an increase in Cash Reserve Ratio. Explanation:- Money Multiplier = 1/LRR LRR consists of 1) Cash Reserve Ratio (CRR) 2) Statutory Liquidity Ratio (SLR) That means: Money Multiplier = 1/CRR + SLR…
The Central Bank acts as banker to both central and state government. Explanation:- Banker to the Government:- The Reserve Bank of India acts as a banker, agent, and financial advisor to the Central Government and all the State Governments. As…
Components of Legal reserve ratio are Statutory Liquidity Ratio and Cash Reserve Ratio. Explanation:- According to the Legal Reserve requirement, commercial banks are obliged to maintain reserves. It is a very quick and direct method for controlling the credit-creating power…
One rupee note and all coins are issued by the Ministry of Finance. Explanation:- Under Section 22 of the Reserve Bank of India Act, RBI has the sole right to issue currency notes of various denominations except one rupee notes…
Qualitative instruments of monetary policy affect the direction of money supply in the economy. Explanation:- Qualitative controls are designed to regulate the direction of credit.