₦airaland Forum

This argument ensued in a monetary Economics lesson.
What is the meaning of bank reserves in the financial world?..
some said.. Required reserves,
some said... Excess reserves
some said both.
This was borne out of the first step to be taken in the Monetary transmission policy which says;
Central bank reserve reduces bank reserves..

Nairalanders, pls shed more light.

psalmsonovic:
This argument ensued in a monetary Economics lesson.
What is the meaning of bank reserves in the financial world?..
some said.. Required reserves,
some said... Excess reserves
some said both.
This was borne out of the first step to be taken in the Monetary transmission policy which says;
Central bank reserve reduces bank reserves..

Nairalanders, pls shed more light.

Bank reserves or required reserve ratio is the amount of money that banks keep intact. That is, they do not lend it to customers. It is usually deposited with the central Bank. It is like saying " out of your 100k salary, you should spend only 70k and keep the remaining 30k " You are not expected to lend the 30k to your friends, parents, relatives or even your wife. So the 30k that should be kept intact is your reserve/required reserve ratio.

The implication of this is that, if the Bank reserve is high, banks will have little to lend to customers and low reserve means more cash for lending.

2rutalk1:
Bank reserves or required reserve ratio is the amount of money that banks keep intact. That is, they do not lend it to customers. It is usually deposited with the central Bank. It is like saying " out of your 100k salary, you should spend only 70k and keep the remaining 30k " You are not expected to lend the 30k to your friends, parents, relatives or even your wife. So the 30k that should be kept intact is your reserve/required reserve ratio.
The implication of this is that, if the Bank reserve is high, banks will have little to lend to customers and low reserve means more cash for lending.

2rutalk1:
Bank reserves or required reserve ratio is the amount of money that banks keep intact. That is, they do not lend it to customers. It is usually deposited with the central Bank. It is like saying " out of your 100k salary, you should spend only 70k and keep the remaining 30k " You are not expected to lend the 30k to your friends, parents, relatives or even your wife. So the 30k that should be kept intact is your reserve/required reserve ratio.
The implication of this is that, if the Bank reserve is high, banks will have little to lend to customers and low reserve means more cash for lending.

Noted... thank you for this piece