In the context of Indian economy which of the following is are the purpose purposes of lsquo Statuto...........

Economic Affairs Types of Banks and Banking

In the context of Indian economy; which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

1.To enable the Central Bank to control the amount of advances the banks can create

2.To make the people’s deposits with banks safe and liquid

3.To prevent the commercial banks from making excessive profits

4.To force the banks to have sufficient vault cash to meet their day-to-day requirements

Select the correct answer using the code given below.

1 only

1 and 2 only

2 and 3 only

1, 2, 3 and 4

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Explanation:

1 only

The statutory reserve requirements refer to the reserves that banks are required to maintain with the central bank as a certain percentage of their deposits. The primary purpose of imposing statutory reserve requirements includes:

To enable the central bank to control the amount of advances the banks can create: By adjusting the reserve requirements, the central bank can influence the money supply in the economy and control credit creation by commercial banks.

The other options mentioned (2, 3, and 4) are not typically associated with statutory reserve requirements. The purpose of making people's deposits safe and liquid, preventing excessive profits, and ensuring sufficient vault cash are more related to overall banking regulations, monetary policy, and banking operations rather than specifically to statutory reserve requirements.

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