Language: English (India)

The Mechanics of Fractional Reserve Banking, The Anatomy of Fractional Reserve Banking

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1. What is the meaning of Fractional Reserve Banking?

2. Why do commercial banks need to hold reserves in fractional reserve banking? or

3. What is the purpose of reserve requirements in the fractional reserve banking system?

4. Whether separate ratio is assigned for cash and for funds at central bank in the fractional reserve banking system?

5. How reserve requirement in Fractional Reserve Banking is usually expressed?

6. How Fractional Reserve Banking Works?

7. What are some of the factors on which the actual money creation process depends?

8. Do you agree with the statement “Banks make money out of thin air.” Comment.

9. Do commercial banks have the authority to produce physical currency? or

10. Is that power solely held by the central bank?

11. Why do most countries grant the central bank the sole legal power to issue physical cash? OR

12. What is the underlying reason for central banks having the exclusive legal authority to issue physical currency in most countries?

13. Who is responsible for the production of physical currency in India?

14. Who withdraws old and damaged banknotes from circulation?

15. How do commercial banks typically acquire physical cash to meet their operational needs, including supplying ATMs and providing teller services to customers?

16. Whether Reserve Bank of India produces coins directly?