NCERT Solutions Class 12 Economics Banking

NCERT Solutions Class 12 Economics Banking. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.

Chapter - Banking

1. Explain the functions of a commercial bank?

Ans: Deleted from syllabus.

2. What is money multiplier? How will you determine its value? What ratios play an important role in the determination of the value of the money multiplier? [3-4 Marks] 


1. When the primary cash deposit in the banking system leads to multiple expansion in

the total deposits, it is known as money multiplier or credit multiplier.

2. The value of Money Multiplier =1/LRR

where LRR = Legal Reserve Ratio.

3. Legal Reserve Ratio: It is the minimum ratio of deposits legally required to be kept by the commercial banks with themselves and with the central bank.

4. So, there are two ratios which play an important role in the determination of the value of the money multiplier. They are:

(a) Cash Reserve Ratio: It refers to the minimum percentage of a bank’s total deposits, which it is required to keep with the central bank.

(b) Statutory Liquidity Ratio: It refers to minimum percentage of net total demand and time liabilities, which commercial banks are required to maintain with themselves.

3. What are the instruments of monetary policy of RBI? How does RBI stabilize money supply against exogenous shocks? [6 Marks]


1. Principal instruments of Monetary Policy or credit control of the Central Bank of a country(RBI) are broadly classified as:

(a) Quantitative Instruments,

• Bank Rate

• Repo rate

• Reverse Repo rate

• Open Market Operations (OMO)

• Varying Reserve Requirements (fa) Qualitative Instruments

• Imposing margin requirement on secured loans

• Moral Suasion

• Selective Credit Controls (SCCs)

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