Question

If reserve ratio is 10% and primary deposit is ₹1,250 crores, the total deposit created by commercial banks will be ______

Options

• ₹13,500 crores

• ₹10,500 crores

• ₹12,500 crores

• ₹11,500 crores

Answer 1

If reserve ratio is 10% and primary deposit is ₹1,250 crores, the total deposit created by commercial banks will be ₹12,500 crores.

Explanation:

Given, Cash reserve ratio = 10%

Primary deposit = ₹1,250 crores

Total deposits are the overall 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) × Primary deposit

= (1/10%) × ₹1,250 crores

= (100/10) × ₹1,250 crores

= 10 × ₹1,250 crores

= ₹12,500 crores