What does reserve mean?

Reserve is a kind of reserve fund set up to reduce costs and deal with risks. The purpose of saving is to cope with future repurchase and redeem debts or funds to prevent losses. The deposit reserve ratio represents the ratio of the amount of deposit reserve set by the central bank to all deposits. It is by adjusting the deposit reserve ratio that the central bank achieves the purpose of influencing credit expansion capacity and money supply.

Introduction to deposit reserve

The ratio of deposit reserve to total deposits of financial institutions is the deposit reserve ratio. Under the relevant system of deposit reserve, financial institutions can't use all their deposits for loan business, and institutions must reserve certain funds as deposit reserve to ensure that they can normally handle withdrawal services for customers when they face temporary withdrawal requirements. At the same time, the establishment of deposit reserve is conducive to maintaining the normal operating order of financial institutions themselves.