Question

Primary deposits are Rs 10,000. Assume LRR IS 100%. Credit Creation will be ……​

Answer 1

Answer:

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