Question:medium

What does a bank do if there are no excess reserves?

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What do banks do when they have no extra money?
Updated On: Feb 11, 2026
  • Stop Client's transaction
  • Borrow reserves from other bank
  • Ask client's to repay loans
  • Increases lending rate
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The Correct Option is B

Solution and Explanation

Banks lacking excess reserves can borrow from other banks to fulfill reserve requirements.

Banks routinely manage reserves for withdrawals and regulatory compliance.

Interbank borrowing is a key strategy employed in these scenarios.

Thus, (b) is correct.

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