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Credit Creation

Maximum credi...

Question

Maximum credit that the commercial banks can legally create depends on their:

A

Gold reserves

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B

Cash reserves with the RBI

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C

Statutory liquidity ratio

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D

Term deposits

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Solution

The correct option is B
Cash reserves with the RBI

Cash reserves with the RBI determine the amount of credit banks can create.

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Similar questions

Q. Cash reserve ratio and statutory liquidity ratio are fixed by the commercial banks themselves.

Q. Increase in cash reserve ratio adversely affects the capacity of commercial banks to create credit.

Q. Distinguish between:

1. Central Bank and Commercial Bank
2. Quantitative Credit Control Measures and Qualitative Credit Control Measures
3. Bank Rate and Open Market Operations
4. Cash Reserve Ratio and Statutory Liquidity Ratio

Q. Consider the following statements:
1) In India , the Cash Reserve Requirement is between 3 to

15 %

of the total demand and time deposits of the commercial banks.
2) In India , the Statutory Liquidity Requirement is not less than

25 %

of the total demand and time deposits of commercial banks.
Which of the statements given above is/are correct about the General Credit Control measures used by the RBI?

The reserves held by commercial banks with the RBI , over and above the statutory minimum, are called

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