Deposit reserve refers to the deposit deposited in the central bank prepared by financial institutions to ensure the needs of customers to withdraw deposits and settle funds. The ratio of the deposit reserve required by the central bank to its total deposit is the deposit reserve ratio.

The real effect of the deposit reserve ratio policy is that it can expand the credit of commercial banks and adjust the money multiplier. There is a multiplier relationship between the credit expansion ability of commercial banks and the amount of base money put in by the central bank, and the multiplier is inversely proportional to the deposit reserve ratio. Therefore, if the central bank adopts a tightening policy, it can increase the statutory deposit reserve ratio, thus the deposit reserve limits the credit expansion ability of commercial banks, reduces the money multiplier, and finally shrinks the amount of money and credit, and vice versa.

Tips: The above information is for reference only.

Response time: 2021-11-12. Please refer to the latest business changes announced by Ping An Bank in official website.