Computer Science, asked by yakshit32, 1 month ago

What is legal reserve ratio? How does it influence the process of
credit creation?

Answers

Answered by rajeevgupta39

0

Explanation:

It is legally compulsory for the banks to keep a certain minimum fraction of these deposits as cash. The fraction is called the Legal Reserve Ratio (LRR). The LRR is fixed by the Central Bank. Let us now explain the process, suppose the initial deposits in banks is Rs 1000 and the LRR is 10 percent.

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