how much percentage of deposite is been reserved by bank????
Answers
Explanation:
The current CRR rate is 4%. Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank.
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The Garn-St Germain Depository Institutions Act of 1982 allows some banks to be exempt from the requirement rule. Currently the threshold for exemptions is set at $2 million, which means the first $2 million of reservable liabilities are not subject to reserve requirement rules. The threshold is adjusted each year as set forward by a calculation provided in the act. As of Jan. 1, 2018, banks with deposits less than $16 million have no reserve requirement. Banks with between $16 million and $122.3 million in deposits have a reserve requirement of 3%, and banks with over $122.3 million in deposits have a reserve requirement of 10%. Non-personal time deposits and eurocurrency liabilities have had a reserve ratio of zero since December 1990.
The reserve requirement is another tool that the Fed has at its disposal to control liquidity in the financial system. By reducing the reserve requirement, the Fed is executing an expansionary monetary policy, and conversely, when it raises the requirement, it's exercising a contractionary monetary policy. This action cuts liquidity and causes a cool down in the economy.