Posted in Finance, Accounting and Economics Terms, Total Reads: 291
Definition: Primary Reserves
Primary reserve is the bare minimum amount of money which must be there with a bank to run it and perform all the banking tasks. This is the threshold which must be kept with a bank to fulfill all banking regulations, legal rules etc
It contains money accessible within the bank and deposits owed thereto by different banks. These also are known as the legal reserves. From this money accessible tellers square measure able to meet client demands for withdrawals, exchanges, and loans.
Primary reserves are unbroken so as to hide surprising major withdrawals or runs of withdrawals. They function a defense against a considerable reduction in liquidity. These reserves should be unbroken a lot of liquid than secondary reserves, which can be endowed in marketable securities like Treasury offerings.
Primary reserves are the minimum amount kept in a banks to operate a bank. This is the bare amount of money needed to be present and hence cannot be used for investments or for giving loans.