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What is a deposit reserve? What is the use?

Edit: Kristina Source: Financial 360 finishing Date: 2015-06-25

Summary:

The deposit reserve is the deposit made by the central bank for the purpose of guaranteeing the user to withdraw the deposit and fund settlement. The ratio of the reserve required by the central bank to its total deposit is the deposit reserve ratio. The proportion of the deposit reserve is usually decided by the central bank

 

  Deposit reserveWhat is it? It is a deposit made by a financial institution to ensure that the user needs to withdraw deposits and fund settlements. The ratio of the reserve required by the central bank to total deposits is the deposit reserve ratio. The proportion of the deposit reserve is usually determined by the central bank and is called the deposit reserve ratio.

 

Under the modern financial system, the reserves of financial institutions are divided into two parts. Some of them have their own business pools in the form of cash. The other part is stored in the form of deposits in the central bank. The latter is the deposit reserve.

 

What is the use of deposit reserve?

 

"Deposit reserves" are generally not allowed to be used to ensure that commercial banks pay for withdrawals from customers. At the same time, it also has the function of clearing funds and is also a monetary policy tool.

 

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