Money and banking

Economics (CUET)

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

13,500 crores

10,500 crores

12,500 crores

11,500 crores

Explanation:

Option (3) is correct.
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 =
Primary deposit
(1/ Cash reserve ratio) x
= (1/10%) x 1,250 crores
= (100/10) x 1,250 crores
= 10 x 1,250 crores
12,500 crores

By: Parvesh Mehta

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