Bank Reserve Rate system

2. What is bank reserve ratio?
 The reserve requirements (or cash
reserve ratio)is a central bank regulation
employed by most ,but not all ,of the
worlds central banks ,that sets the
minimum amount of reserves that must
be held by a commercial bank.

3. Uses of bank reserve
requirements :
 In monetary policy
 Open market operations ( buying and
selling govt.issued bonds)

4.  Higher reserve ratios reduce the money
supply.
 Lower reserve ratios higher the money
supply.

5. In inflation:
(Selling the govt securities and bonds by
central bank )
In deflation:
(purchasing the govt securities and bonds
from markets)

6.  Bank rate is the rediscount rate which is
held by the commercial bank
 When inflation or deflation occur central
bank rediscounts the bill of exchange.