The actual reserve is the amount of funds or cash that a bank has on deposit with the main reserve bank. Most of the cases it is the sum of money that a bank has on deposit with the Federal Reserve Bank and those in the branches across an area of jurisdiction (Macesich 28). In economic terms, branches of a Federal Bank are referred to as commercial districts. Furthermore, actual cash includes up to a bank's vault cash. The actual reserve can be calculated by summing up the entire bank's reserve deposit at the Federal Bank with its vault cash. However, this is only done within a two week period, usually referred to as the maintenance period (Macesich 31).
The amount of reserves a bank can significantly affects its ability to give a credit. If a bank has only the required reserve, that is, the amount it's required by law to hold then it cannot be able to give loans. At no point in time can a bank lack the required reserve, if it lacks required reserve it would be placed under receivership. It, therefore, means that a bank must have excess reserves for it to be able to give out loans. In a nutshell, the excess reserve is the money that is available to be given out as loans (Macesich 32).
Work Cited.
Macesich, George. Central Banking: The Early Years: Other Early Banks. Issues in Money and
Banking. Westport, Connecticut. Prager Publishers, Greenwood Publishing Group. 2012.
Print.
