Question

Calculate the total deposit created by commercial banks if reserve ratio is $10\%$ and primary deposit is $Rs.1,250$ crores.

Answer 1

Given: Cash reserve ratio= 10%

Primary deposit= Rs. 1,250 crores

Total deposits are the over all money including the primary deposits created by the commercial banks as a process of credit creation through its primary deposit.

Total deposit= (1/ cash reserve ratio) x primary deposit

= (1/10%) x 1,250 crores

= (100/10) x 1,250 crores

= 10 x 1,250 crores

= 12,500 crores