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In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?
1. To enable the Central Bank to control the amount of advances the banks can create
2. To make the people's deposits with banks safe and liquid
3. To prevent the commercial banks from making excessive profits
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements
Select the correct answer using the code given below:
1. To enable the Central Bank to control the amount of advances the banks can create
2. To make the people's deposits with banks safe and liquid
3. To prevent the commercial banks from making excessive profits
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements
Select the correct answer using the code given below:
- a)1 only
- b)1 and 2 only
- c)2 and 3 only
- d)1, 2, 3 and 4
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
In the context of Indian e conomy; which of the f ollowing is/are the ...
A statutory reserve is an amount of cash a financial institution, such as a bank, credit union, or insurance company, must keep on hand to meet the obligations incurred by virtue of accepting deposits and premium payments. The statutory reserves required of banks and credit unions are generally set by the nation's central bank, and those required of insurance companies are set by statute or regulation by the national, state or provincial government or regulatory authority. Calculated in various ways, statutory reserves are required to ensure that financial institutions are capable of paying claims even in a calamitous situation.
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In the context of Indian e conomy; which of the f ollowing is/are the ...
Statutory Reserve Requirements, also known as Cash Reserve Ratio (CRR) in India, refer to the percentage of deposits that commercial banks are required to keep with the central bank. They serve several purposes in the Indian economy, as mentioned below:
1. Controlling the amount of advances: The primary purpose of imposing Statutory Reserve Requirements is to enable the central bank (Reserve Bank of India) to control the amount of advances that commercial banks can create. By mandating banks to keep a certain proportion of their deposits as reserves, the central bank can limit the amount of money available for lending. This helps in maintaining price stability and controlling inflation in the economy.
2. Ensuring safety and liquidity of deposits: Another purpose of Statutory Reserve Requirements is to make people's deposits with banks safe and liquid. By requiring banks to hold a certain percentage of their deposits as reserves, it ensures that a portion of the deposited money is readily available to meet the withdrawal demands of depositors. This helps in maintaining public confidence in the banking system and ensures the safety of people's savings.
3. Preventing excessive profits: Statutory Reserve Requirements also serve the purpose of preventing commercial banks from making excessive profits. When banks hold a portion of their deposits as reserves, they cannot use that money for lending or investment purposes, which limits their ability to earn additional income from interest or other activities. This helps in preventing banks from exploiting their market power and making excessive profits at the expense of depositors and borrowers.
4. Meeting day-to-day requirements: Additionally, Statutory Reserve Requirements force banks to have sufficient vault cash to meet their day-to-day requirements. By mandating a certain percentage of deposits to be held as reserves, banks are compelled to maintain a portion of their assets in the form of cash, which can be used for fulfilling their daily operational needs, such as cash withdrawals, interbank settlements, and managing liquidity.
In conclusion, Statutory Reserve Requirements in the Indian economy serve multiple purposes, including enabling the central bank to control lending, ensuring the safety and liquidity of deposits, preventing excessive profits, and ensuring that banks have sufficient cash to meet their daily requirements.
1. Controlling the amount of advances: The primary purpose of imposing Statutory Reserve Requirements is to enable the central bank (Reserve Bank of India) to control the amount of advances that commercial banks can create. By mandating banks to keep a certain proportion of their deposits as reserves, the central bank can limit the amount of money available for lending. This helps in maintaining price stability and controlling inflation in the economy.
2. Ensuring safety and liquidity of deposits: Another purpose of Statutory Reserve Requirements is to make people's deposits with banks safe and liquid. By requiring banks to hold a certain percentage of their deposits as reserves, it ensures that a portion of the deposited money is readily available to meet the withdrawal demands of depositors. This helps in maintaining public confidence in the banking system and ensures the safety of people's savings.
3. Preventing excessive profits: Statutory Reserve Requirements also serve the purpose of preventing commercial banks from making excessive profits. When banks hold a portion of their deposits as reserves, they cannot use that money for lending or investment purposes, which limits their ability to earn additional income from interest or other activities. This helps in preventing banks from exploiting their market power and making excessive profits at the expense of depositors and borrowers.
4. Meeting day-to-day requirements: Additionally, Statutory Reserve Requirements force banks to have sufficient vault cash to meet their day-to-day requirements. By mandating a certain percentage of deposits to be held as reserves, banks are compelled to maintain a portion of their assets in the form of cash, which can be used for fulfilling their daily operational needs, such as cash withdrawals, interbank settlements, and managing liquidity.
In conclusion, Statutory Reserve Requirements in the Indian economy serve multiple purposes, including enabling the central bank to control lending, ensuring the safety and liquidity of deposits, preventing excessive profits, and ensuring that banks have sufficient cash to meet their daily requirements.
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In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer?
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In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer?.
In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the context of Indian e conomy; which of the f ollowing is/are the p urpose/purposes o f 'Statutory Reserve Requirements'?1. To enable the Central Bank to control the amount of advances the banks can create2. To make the people's deposits with banks safe and liquid3. To prevent the commercial banks from making excessive profits4. To force the banks to have sufficient vault cash to meet their day-to-day requirementsSelect the correct answer using the code given below:a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1, 2, 3 and 4Correct answer is option 'A'. Can you explain this answer?.
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