Question

The reserve held by commercial banks over and above the statutory minimum with the RBI are called:
1. Cash Reserve
2. Deposit Reserve
3. Monetary Reserve
4. Excess Reserve

Answer 1

Correct Answer - Option 4 : Excess Reserve

The correct answer is Excess Reserve.

• The reserve held by commercial banks over and above the statutory minimum with the RBI is called Excess Reserve.
• Excess reserves are capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors, or internal controls.
• For commercial banks, excess reserves are measured against standard reserve requirement amounts set by central banking authorities.
• For any calculation of RBI’s excess reserve, the key items of interest on the liability side are-
  • The contingency fund
  • Asset development fund
  • Currency and gold revaluation
  • Investment revaluation accounts for foreign and rupee securities.