Banking Systems

The maximum total deposit that can be created in the banking system is determined by the money multiplier. The money multiplier is calculated as the inverse of the Cash Reserve Ratio (CRR).
The formula for the money multiplier is:

%5Ctext%7BMoney%20Multiplier%7D%20%3D%20%5Cfrac%7B1%7D%7B%5Ctext%7BCRR%7D%7D%20%3D%20%5Cfrac%7B1%7D%7B0.20%7D%20%3D%205

Therefore, the maximum total deposit is:

%5Ctext%7BMaximum%20Total%20Deposit%7D%20%3D%20%5Ctext%7BInitial%20Reserve%7D%20%5Ctimes%20%5Ctext%7BMoney%20Multiplier%7D%20%3D%20%E2%82%B9100%20%5Ctimes%205%20%3D%20%E2%82%B9500

Thus, the maximum deposit that can be created in the system is ₹500.

High-Yield Trend

Chapter Questions
1 MCQs

Official Solution

Banking Systems

High-Yield Trend

Chapter Questions 1 MCQs

Official Solution

Chapter Questions
1 MCQs