In the context of Indian economy, which of the following is/are the purpose/purposes of ‘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 below:
-
A.
1 only
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B.
1 and 2 only
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C.
2 and 3 only
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D.
1, 2, 3 and 4
Correct Answer:
A. 1 only
Explanation:
Statutory reserve requirements are a banking regulation that mandates banks maintain a specific portion of their total deposits as liquid assets. This measure is primarily designed to limit the amount of credit banks can extend.
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