Question

Calculate the legal reserve requirements if initial deposit of $Rs.200$ crores lead to creation of total deposits off $Rs.1,600$ crores.

Answer 1

Total deposits $=1,600$ crores; Initial deposit $=Rs.200$ crores
Money Multiplier $=\frac{TotalDeposits}{InitialDeposits}=\frac{1,600}{200}=8$
We also know: Money Multiplier $=\frac{1}{LRR}$
It means, $8=\frac{1}{LRR}$.
Or, $LRR=0.125$ or $12.5$.