The ratio of money held by the public in currency to that held as deposits in commercial banks is called :
Answer & explanation
Correct answer: option 1
The correct answer is option (1) : Currency Deposit Ratio
Currency deposit ratio: The ratio of money held by the public in currency to that held as deposits in commercial banks.
- It indicates the public’s preference for holding cash versus depositing it in banks.
- A higher CDR suggests that people are holding more cash, which can reduce the banking system’s ability to create credit.
Cash Reserve Ratio (CRR) is the percentage of total deposits that commercial banks are required to keep as reserves with the Reserve Bank of India (RBI).
Statutory Liquidity Ratio (SLR) is the minimum percentage of net demand and time liabilities (NDTL) that banks must hold in the form of liquid assets, such as cash, gold, or government securities.
High Powered Money (H) refers to the total currency in circulation along with the reserves held by commercial banks with the central bank.