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Question : If the amount of initial deposits with commercial banks is INR 4000 crore and LRR is 20%, then the total deposits created will be:

Option 1: 12000

Option 2: 20000

Option 3: 800

 

Option 4: 6000


Team Careers360 22nd Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: 20000


Solution : The correct answer is  (b) 20,000

The formula to calculate the total deposits created is:

Total Deposits Created = Initial Deposits / Reserve Requirement

In this case, the initial deposits are INR 4000 crore and the LRR is 20% (or 0.2).

Total Deposits Created = 4000 crore / 0.2

Total Deposits Created = 20000 crore

Therefore, the total deposits created by commercial banks would be INR 20000 crore.

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