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Banks maintain ____ as a provision to pay depositors who may come to withdraw money any day.

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Detailed Solution

Banks maintain cash reserves as a provision to pay depositors who may come to withdraw money any day. The minimum amount of cash that banks have to maintain to meet any unexpected demand for withdrawal is called a "cash reserve." These reserves can be kept either by the banks themselves or sent to the central bank. The main purpose of a cash reserve is to prevent banks from running out of money to meet customers' withdrawal demands. A minimum percentage of deposits has to be maintained by banks, and that percentage is determined by the RBI. Apart from this minimum amount, it is up to the bank to maintain excess reserves.

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