Question

If initial deposit is Rs.
500000, and the total
deposit created is Rs
2000000 than the CRR
would be
percent
1.25
2.20
3.15
4.10​

Answer 1

Answer:

I don't know

Explanation:

I want point

Answer 2

Option 1 is the correct answer.

If initial deposit is Rs.500000, and the total deposit created is Rs 2000000 than the LRR would be 25 percent.

1. LRR is the legal reserve ratio.This ratio tells about minimum proportion of deposits that are to be kept by commercial bank with Reserve Bank of India.
2. There are two types of legal reserve ratios (LRR)

• Cash reserve ratio
• Statutory liquidity ratio

Initial deposit - Rs. 500000

Total deposit created - Rs. 2000000

Money creation= Initial Deposit * 1/LRR

therefore,

2000000 = 500000*1/LRR

⇒ LRR= 500000/2000000

⇒LRR or CRR = 0.25

or 25 %