Nt MACLEAN AT) | “experts enhance their ent of country. CASH RESERVE OF BANK Mot heey yereine BlOa eo 4 Cadtrned decaf) Foam toes al the demand liabilities on deposits, he at amount of cash reserve. This is considered ei ie for a bank. If the bank does not keép an adequate amou, Pere and at any time banker is not able to meet the demand obj G sen te good wi of the bank will be affected and faith of customers . tou tebank will be shaken which 1 may lead the bank to bank-ruptey. On the hand if more cash reserve is kept than the requirements then the of the bank will be affected so is need for an adequate amount iicash reserve to be kept by the commercial bai g S System of a counta yaa! their abiliti ~ in this ilities and Contribute towane & IS the ind obligations, In order 4 noe (scanner with Camscannerr142. com $$ gearortaarnesen SS Cash reserve of a bank is in following three forms, 3 Cash with central bank, (i) Cash in hand in form of coins and currency, (ii) Balances with other banks. EFINITIONS: @ “The part of total capital of any trading bank, 4, corporation or institution which is essential to deposit yg *% bank or to keep with it in cash form is called reserve” a = ee ee OG. tas i) Mes that part of total assets oF capital of a commercial bay, Financial institution, which is necessary 10 keep with cenrai, ‘or itself in form of cash is called cash reserve. (hone, © (ii) The cash, which is possessed by any trading bank inorder om«BANKING AND FINANCE. 143 A FACTORS OF CASH RESERVE amount of cash reserve cannot be det «depends upon the following factors cee Pane rule oa? egal Requirements: |-f law req } dia “to Fe the law requires that every “bank must_mainfan’ acer he fe deposi oa cash reserve withthe central Dank of te fen bas st an a ha a reserve. If ee tos raised then more cash reserve is required, and Thi own then less cash reserve may be required “ a nature of Accounts! Np, gyesewe fr Curent Ae irpeople deposit their money in current deposits, the bank keeps lee money as cash reserve. Whereas; in ease of fixed or term deposits pesnot need 10 Keep heavy cash reserve, [weofCredit Instruments: 1 GP). ae / Fon len Conk veajurg/ itpsyments inthe locality are mostly made by cheques or drafts or etc., so the amount of cash reserve would be smaller. On the other: Gammoctions are carried mostly on cash basis then a larger reserve oftavestment Habit: A. Thorn Graber Goh, habit of investing their’ <“%, of the place were in the ‘then a smaller cash reserve Wo M Yer ber cook Tocality are in the habit of saving then the bank will uld be required and vice q Jess'trend of saving then more cash reserve gir. 7 ane Convert de Ten Cash "e9/: fn such a way that at sa sip144 ie 8% Size of Deposits: 1AL}E OS PLS —S Fra If the sizeof deposits is very large and belongs tog gp of people, then the casi reserve should be large enough ee one) heavy withdrawal now and then. 16 Cm, ete tg Cn nearty 9. Rediscounting Facilities: "4. C= sia Bak mere we If there is'a central bank in the eathy Sido eH he facilities to the member banks then the amount of cash ream would be smaller beause the commercial banks can reds withthe central bank to get the funds. | 10. Nature of Depositors: Bw» ino 19 —> Mine 40 If the depositors are trad&isy"Businessmen, of Industiaied bank has to keep more cash reserve were as ifthe depositors do ys.” to business community then there will be less need of cash reserve, M1, Profit Ratio) > |e) Carol If the profit rato of bank is high then people deposit this in abundance so the bank has to Keep less amount of cash reserve, Oo. contrary, if the ratio of profit is lower then more cash resere ily required, 12. Location of Bank: Om FB bank is located in industrial or commercial ares then iiss much more cash reserve. While in case of agricultural and recs areas, bank needs less cash reserve, 13, Trustin Banke) deca sty cute in locality then the people do © which bank does not keep 5eae eecuition he the ak it! a vemnensconatiost rite —> ler Coch if there ix'politioal stability fending 10 eeonom stability in the sear, aor aks Kee oss cash reserve and more C coun instability abt veh > Blove ae seasonal Requirements: ©°) Lanne “ fe, climate requirement are also kept ne of cultivation ® While determining cash reserv ip) farmers ane! traders nied more Ops. inview (© ‘ash at the ti toni harvesting the cn sn Initial and Last Dates of the Month: Wlext Cat Due to the needs of customers or account holders in the beginning sata the end of month, the bank needs more cash CREDIT CREATION According to Reynold: “Bank is the factory of ereating credit”. le jons of banks eR cme poet part of deposits for ‘Byen then the customers of the ying in the banks are quite ‘exploit the trust of their n the amount of fon the part of the is as a multiple of their