RRB capital split
Central government 50% · State government 15% · Sponsoring public sector bank 35%
Any question on regional rural banks. The three shares must sum to the whole capital, which is the check to run before writing the answer.
- sponsoring bank
- The public sector bank that sponsors the RRB and contributes 35% of its capital
Credit creation
Total deposits = fresh deposit / reserve ratio
Total credit created = total deposits - fresh deposit
Deposit multiplier = 1 / reserve ratio
After n rounds: first loan x (1 - (1-r)^n) / r
Whenever a fresh deposit and a reserve ratio are given. Read whether the question asks for total deposits or total credit, because they differ by the original deposit.
- reserve ratio
- Fraction of every deposit not lent on; in India CRR plus SLR
- n
- Number of lending rounds, when the cascade is cut short
Lendable funds at one bank
Lendable = deposits x (1 - CRR% - SLR% - vault cash%)
Maximum credit-deposit ratio = lendable / deposits
When a question asks what a single bank can lend, as opposed to what the system can create. Add every reserve percentage before multiplying once.
- vault cash%
- Cash held at branches for operations, over and above the CRR