In the banking system, central banks (like the RBI in India) mandate commercial banks to hold a certain percentage of their deposits as reserves. These mandatory reserves are primarily composed of the Cash Reserve Ratio (CRR), which is the amount of funds banks must keep with the RBI, and the Statutory Liquidity Ratio (SLR), which is the percentage of deposits banks must maintain in specified liquid assets (like government securities, gold, and cash) with themselves. Any reserves held by commercial banks with the central bank (RBI) or as vault cash that are above the required statutory minimum are referred to as Excess Reserves. Banks may hold excess reserves for various reasons, such as meeting unexpected withdrawal demands, facilitating interbank payments, or in anticipation of future lending opportunities.
The reserve held by commercial banks over and above the statutory minimum with the RBI are called:
Asked in OPSC CS Prelims 2020 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
More Economic Development questions
- Which ones of the following are quantitative inflation control methods ? 1. Bank Rate 2. CRR 3. SLR 4. Open Market Operations
- Which of the following is not a measure of selective credit control ?
- Which of the following is/are incorrectly matched? Select your answer using the codes given below I. Credit creation - Reserve Bank of India II. Commercial Bank - Accepting deposits III. Reserve Bank of India - Control of credit IV. Quantitative Control - Scheduled Banks
- The objectives of Monetary policy is / are I. Price stability II. Economic growth III. Social justice IV. Reducing budgetary deficit
- The Monetary Policy of the Government of India emphasised the following two aims of the economic policy (i) To control and reduce inflationary pressure in the economy. (ii) Speed up economic development in the country to raise national income and standard of living of the people. (iii) To increase the per capita income. (iv) To have a cheap money policy. Select the correct answer by using the codes given below :
- RBI launched the Market Stabilisation Scheme (MSS) in 2004
- Which one of the following best describes the term 'Quantitative Easing'?
- Consider the following statements: 1. Repo rate is the interest rate at which RBI lends to commercial banks for short period. 2. Reverse repo rate is the interest rate which RBI pays to commercial banks on short-term deposits. 3. Gap between repo rate and reverse repo rate has been declining in India in the recent past. Which of the statements given above is/are not correct?
