Banking: Understanding Reserve Ratios
1 min read
Reserve requirements are the amount of funds that a bank must hold in reserve against specified deposit liabilities.
Reserve requirements are the amount of funds that a bank must hold in reserve against specified deposit liabilities.
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Get full access to all Data Science, Machine Learning, and AI courses built for finance professionals.
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A step-by-step guide covering Python, SQL, analytics, and finance applications.
Or create a free account to access more
Reserve requirements are the amount of funds that a bank must hold in reserve against specified deposit liabilities.
The dollar amount of a depository institution’s reserve requirement is determined by applying the reserve ratios specified by the central bank of a country. This is also referred to as the “cash reserve ratio” (CRR).
The reserve ratio affects the money supply in a country.
This video explains the concept of reserve ratio and how reserve requirements limit how much lending a bank can do.