Chapter 3 Part 2 - Banking

Economics Class 12
Macroeconomics

Reserve Deposit Ratio - Meaning, Importance and Calculation

### Transcript

Reserve Deposit Ratio It is the Ratio of Reserves kept by bank to Total Deposits Reserve Deposit Ratio (RDR) Total Deposits of Bank Deposit Rs 100000 It means 20000 kept as Reserve by Bank Reserve Deposit Ratio Total Deposits of Bank Total Reserves of Bank Loan Rs 80000 Explanation for Reserve Deposit Ratio We know that Bank Receives Deposits and Give them as loans to Public Suppose a Bank Received 100 Lacs Deposits It cannot give whole 100 Lacs as loan It has to keep certain amount as Reserve Suppose Reserve Deposit Ratio is 10% Loan Amount =100 lacs Reserve to be kept = 10% of 100 lacs =10 lacs Banks can give loan of 100-10=90 Lacs Suppose Reserve Deposit Ratio is 20% Loan Amount =100 lacs Reserve to be kept = 20% of 100 lacs =20 lacs Banks can give loan of 100-20=80 Lacs Less the RDR More amount available to give loans More the RDR Less amount available to give loans Reserve Deposit Ratio- Where are these Reserves to be kept by Bank? RDR is the Ratio of Reserves kept by bank to Total Deposits Reserve Deposit Ratio (RDR) Total Reserves of Bank Total Deposits of Bank Where are these Reserves kept? These are kept as Vault Cash (Cash kept in bank locker) Liquid Assets like Gold (Gold can be sold anytime) Reserves with Central bank (Banks keep money with RBI)