What will be the amount of initial reserves if Cash Reserve Ratio (CRR) is 20% and total credit creation is ₹500?

₹100

Money multiplier =$\frac{ 1}{CRR}$

Thus, according to the question, initial reserves will be:

Money multiplier (k) = \(\frac{ 1}{\text{20%}}\) = 5

Thus, credit creation will be 5 times the inital reserves.

Credit creation = 500 (given) or 5 times initial reserves i.e. 5 (initial reserves)

Therefore, initial reserves =  $\frac{ 500}{5}$= ₹100