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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.

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