Reserve Ratio Calculator
From reserves and total deposits, compute the reserve ratio: reserves ÷ total deposits × 100, the share of deposits a bank must hold as reserves.
Input Data
Results
At a glance:The reserve ratio is the fraction of deposits a bank holds as reserves. Reserve ratio = reserves ÷ total deposits × 100. It limits how much the bank can lend and, with the money multiplier, affects the money supply.
Formula
Reserve ratio = reserves ÷ total deposits × 100.
$$ReserveRatio = \dfrac{Reserves}{Deposits} \times 100\%$$$$MoneyMultiplier = \dfrac{1}{ReserveRatio}$$How to Use
- Enter the reserves.
- Enter the total deposits.
- Read the reserve ratio.
FAQ
What is the reserve ratio and why do banks hold reserves?
The reserve ratio is the share of deposits a bank keeps as reserves (cash or balances at the central bank) and cannot lend out. Under fractional-reserve banking, a bank need not hold all deposits — only a fraction. Reserves serve two purposes: liquidity and safety (to meet withdrawals and settlement) and, in many countries, a statutory requirement set by the central bank. Ratio = reserves ÷ total deposits × 100%.
How does the reserve ratio affect the money supply and the economy?
The reserve ratio is a monetary-policy tool inversely linked to the money supply through the money multiplier (multiplier = 1 ÷ ratio). Lowering the ratio frees up lendable funds, raises the multiplier and expands credit (easing); raising it contracts credit (tightening). Many modern central banks now lean more on policy rates and open-market operations than on frequent reserve-ratio changes.
What is the difference between the required and the actual reserve ratio?
The required (statutory) ratio is the regulatory minimum; the actual ratio is what the bank really holds, which is usually higher — the gap is excess reserves. Banks hold excess reserves for liquidity buffers, lack of good lending opportunities, or because the central bank pays interest on reserves. This calculator gives the actual ratio from your inputs; if you enter the minimum required reserves, you get the statutory ratio.
Why is the actual money multiplier usually below 1 ÷ reserve ratio?
Because the textbook multiplier assumes all excess reserves are lent and all proceeds redeposited with no cash leakage. In reality banks hold excess reserves and borrowers keep part of loans as cash (currency drain), both of which shrink each round of expansion. So the realised multiplier is below the theoretical ceiling. This tool is for teaching and estimation only.
Do some countries no longer use the reserve ratio?
Yes. Many developed economies have cut the statutory ratio very low or abolished it, preferring policy rates and open-market operations, while Basel liquidity rules (LCR, NSFR) now provide broader prudential discipline. Still, many emerging markets actively use it. The ratio's importance varies by place and era, but the reserve-ratio → multiplier → money-supply logic remains the foundation for understanding how banks create money.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.