Question

Alpha Bank has been advised by the Federal Bank to maintain its prescribed cash reserve ratio. What is cash reserve ratio?

A.
ratio of cash to loans disbursed by commercial banks
B.
amount of money that a bank needs to maintain as a proportion of deposits
C.
amount of money that a customer needs to maintain as a minimum balance
D.
ratio of amount deposited to the interest received by the customer

Answer 1

B is the correct answer.

A cash reserve ratio is the percentage of available cash on hand as compared to the deposits (Banks lend out your money) that a country's banking regulator has set for its banks.