Question

During festive season, the currency deposit ratio _____________ .

• A. Decreases
• B. Increases
• C. Has no impact on it
• D. First decreases then increases

Answer 1

The Correct Option is B

During the festive season, more cash is withdrawn for spending, which increases the currency deposit ratio.

Answer 2

During the festive season, there is typically an increase in consumer spending, leading to a higher demand for cash. As people withdraw more money from their bank accounts to make purchases, the currency deposit ratio increases. This ratio measures the proportion of currency held by the public relative to the amount of money deposited in banks.

The increase in cash withdrawals during festive times, such as holidays or festivals, reflects a seasonal change in spending behavior. People often prefer using physical cash for shopping, gifts, and other expenses during these periods, causing the currency in circulation to rise compared to the funds held in bank accounts.

As a result, banks may experience a temporary rise in the demand for cash, and central banks may need to manage liquidity to ensure that the economy continues to function smoothly. A higher currency deposit ratio during the festive season highlights the fluctuation in the money supply and the behavior of consumers in relation to cash usage.