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Why does the central bank lower the reserve rate of banks?

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Question added by FATEH BOUCHENE , institut d'emission , banque centrale d'algerie
Date Posted: 2017/08/15
Allen Ambo
by Allen Ambo , Finance Manager , Qatar Living for Trade & IT Investment

This is an engineered government monetary policy thru its central banking system in most economies. When the central bank lowers the reserve ratio, it lowers the amount of cash banks are required to hold in reserves. This allows them to make more loans to consumers and businesses. This increases the money supply and expands the economy but also note that this goes might also go a long way to spill up inflation.

Panagiotis Ladas
by Panagiotis Ladas , Financial Consultant , SILK Capital Partners S. A, Greece

because the goal is to increase the inflation rate. (money supply etc)

FATEH BOUCHENE
by FATEH BOUCHENE , institut d'emission , banque centrale d'algerie

This is to allow banks to inject more liquidity into the market

Soumyadeep Mazumder
by Soumyadeep Mazumder , Associate Vice President - Retail Risk , IDFC First Bank Ltd.

To seize liquidity of the banks as a regulation when it does not want spending of the country to go high.

salah eddine kalkoul
by salah eddine kalkoul , directeur de banque , banque de développement local -B.D.L

LA Banque Centrale est considérée comme la banque mère des autres banques , sa mission principale consiste à assurer et contrôler toutes  les transactions effectuées par les banques de la place , surtout quant il y'a un élément étranger dans cette transaction à titre indicatif  le commerce extérieur , comme elle est  aussi une banque de dépôt , elle trace la stratégie générale à adoptée par l'état dans le domaine monétaire et finance

Ibukun Emmanel Daniyan
by Ibukun Emmanel Daniyan , Senior Cashier , Universal trust bank Plc

This is done to reduce money in circulation there by reducing inflation. Its a kind of fiscal policy that govt use.

Hishami Kamoga
by Hishami Kamoga , Finance Assistant , United Nations Regional Service Center-Entebbe

This is to allow banks to inject more liquidity into the market through;

  • making more loans to consumers and businesses.
  • increasing money supply and expanding the economy 

Sujit Sahu
by Sujit Sahu , Account Manager , Hippocampus Learning Centres Private Limited

Reserve rate fixed by Central Bank is the percentage of funds to be kept by other banks with central bank. General it lower the reserve rate of banks giving more opportunity to bank to have more funds so that growth can be more.

Mudhar Al-Razouqi
by Mudhar Al-Razouqi , Executive Manager - Corporate Finance , Gulf Bank of Kuwait

In short, by decreasing the reserve rate, the central bank allows the local banks to lend out more funds. Which in turn decreases the lending rate, further stimulating the economy by boosting the money supply.

Ammar Ahmad
by Ammar Ahmad , Accounts Manager , Royal Corporation Pvt Ltd

Central banks take this step to increase the money cerculation in the financial system to improve then economic system but this step is very tender and Govt take such decision normally to acheive long term aims.

cela fait partie  de la politique macroéconomique, la baisse du taux de réserve obligatoire aura une répercussion sur le cout du financement sur le plan micro économique: faire baisser le taux de reserve implique une baisse du cout de financement des banque commerciales auprès de la banque centrale, et ceci implique la baisse du taux d 'interet des crédits des investisseurs auprès des banques commerciale. d'une part. 

de l'autre la baisse du taux d'interet aura par conséquent une hausse de la masse monétaire en circulation ce qui fait augmenter le taux d'inflation.

 

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