Question

what do you think would happen if all the depositors went to ask for their money at the same time?
(ch money and credit class 10)

Answer 1

If all the depositors would go to banks and withdraw their money at the same time, then there will be a huge cash crisis in the banks as they will run our of money. They will not be able to give loan to markets and several companies. There will be no daily transaction in banks, so footfall will be nil. No loans can then be given as crop loans also so this will affect the agricultural produce for the impending season. Bank cash reserve ratio will also decrease drastically. It will lead to a complete collapse of the financial system.