If the reserve ration 20% and the primary deposit are 100 the total lending by the banking system will be
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Explanation:
Given: Cash reserve ratio= 10%
Primary deposit= Rs. 1,250 crores
Total deposits are the over all money including the primary deposits created by the commercial banks as a process of credit creation through its primary deposit.
Total deposit= (1/ cash reserve ratio) x primary deposit
= (1/10%) x 1,250 crores
= (100/10) x 1,250 crores
= 10 x 1,250 crores
= 12,500 crores
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