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What is Reserve requirement ratio?
The Required Reserve Ratio is the percentage/fraction of required reserves that should be held for every dollar of deposits in a depository institution that is required by the Federal Reserve.
What is current cash reserve ratio?
The current cash reserve ratio (CRR) in India set by the RBI is 5% as on 21st august, 2009.
What describes how lowering the required reserve ratio reduces the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
Why is raising the required reserve ratio results in a decrease in the money supply?
When the required reserve ratio is high, banks must loan out a smaller portion of their reserves, resulting in fewer loans.
What is variable reserve ratio?
The variable cash reserve ratio is new method of credit control used by central banks in recent times. The term variable ratio refers to the minimum reserves with the central bank by the commercial banks. As per section 42 (1) of the reserve bank of india, 1934, every scheduled bank has to maintain a minimum cash balance as reserve to be calculated as a percentage on their time and demand liabilities. Variable reserve ratio was used as one of the credit control methods. This methods was suggested by keynes in 1930. This method was first introduced by federal Reserve System of USA in 1935.
