Question

If the banks maintain a cash reserve ratio of 5% with cash base of 1000 crore,the bank creates a total credit of the value​

Answer 1

Answer:

Cash reserve ratio = (primary deposit / total deposit) x 100

= (2,500 / 20,000) x 100

= 12.5 %

Multiplier refers to the number of times the commercial banks multiplies the primary deposit in the credit creation process in order to create total deposits.

Multiplier = 1/ Cash reserve ratio

= 100 / 12.5

= 8 times