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reserve ratio definition pepe unchain Bnb Eth XRP aave Bitcoin Bonk

What is a bank's reserve ratio?

A bank’s reserve usually consists of money it has and is held in its vault. Banks also have cash kept in their account at the central bank. Generally, the reserve ratio is used in monetary policy planning in order to regulate the amount of cash banks can convert to loans.

How is reserve ratio calculated?

The requirement for the reserve ratio is decided by the central bank of the country, such as the Federal Reserve in the case of the United States. The calculation for a bank can be derived by dividing the cash reserve maintained with the central bank by the bank deposits, and it is expressed in percentage. Reserve Ratio Formula is represented as,

Who sets reserve ratios?

Reserve ratios are set by the Federal Reserve, the central bank of the U.S. It is a bank for banks. Its several branches around the U.S. hold deposits for and lend to banks.

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