Consider the following statements about Reserve Deposit Ratio 1 n...........

Economic Affairs Money Supply and Monetary Policy

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Consider the following statements about Reserve Deposit Ratio

1. Reserve deposit ratio is the proportion of the total deposits that commercial banks keeps as reserves.

2. Reserve money consists of the vault cash in banks and deposits of commercial banks with RBI.

3. Cash Reserve Ratio and Statutory Liquidity Ratio are the tools to maintain a reserve deposit ratio.

Which of the statements given above is/are correct?

1 and 2 only

2 only

1, 2 and 3

3 only

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Explanation:

The Reserve Deposit Ratio: Banks hold a part of the money people keep in their bank deposits as reserve money and loan out the rest to various investment projects. Reserve money consists of two things – vault cash in banks and deposits of commercial banks with RBI. Banks use this reserve to meet the demand for cash by account holders. Reserve deposit ratio (rdr) is the proportion of the total deposits commercial banks keeps as reserves.