question_answer

The total deposits of commercial banks are Rs. 1,00,000  crore, while the money created by commercial banks is Rs. 50,00,000  crore. Find the value of Legal Reserve Ratio.

Answer:

We know that, Money created \[=Deposits\,\,of\,\,Commercial\,\,Banks\times \frac{1}{LRR}\]             \[50,00,000=1,00,000\times \frac{1}{LRR}\] \[\Rightarrow \,\,\,\,\,LRR=\frac{1,00,000}{50,00,000}=0.02\]or 2%