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Cash Reserve Requirement Calculator

Work out cash reserve requirement instantly with clear inputs, formula shown and shareable results.

About Cash Reserve Requirement Calculator

Banks must keep a share of deposits as non-interest-bearing reserves with the central bank. Because those funds cannot be lent, the requirement acts as a tax on deposits and directly widens the margin banks need to charge.

Formula

Cash reserve

Reserve = liabilities × ratio; opportunity cost = reserve × lending rate

Worked example

With the default values below, Cash Reserve Requirement Calculator returns Reserve To Be Maintained of $22,500,000.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Net Demand And Time Liabilitiesminimum 0
500,000,000
Cash Reserve Ratioaccepts 0–20 %
4.5 %
Rate Foregone On Reservesaccepts 0–25 %
8 %

Results

Reserve To Be Maintained
$22,500,000.00
Funds Available To Lend
$477,500,000.00
Annual Opportunity Cost
$1,800,000.00
Cost In Basis Points Of Liabilities
36.00

Step by step

  1. 1Values used
  2. 2Cash reserve
  3. 3Reserve To Be Maintained= 22,500,000.00
  4. 4Funds Available To Lend= 477,500,000.00
  5. 5Annual Opportunity Cost= 1,800,000.00
  6. 6Cost In Basis Points Of Liabilities= 36.00

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.

Frequently Asked Questions

Why do central banks impose reserve requirements?

To control money creation and to ensure a minimum settlement liquidity buffer in the system.

Is interest paid on reserves?

In some jurisdictions yes, but traditionally the cash reserve earns nothing, which is why it is costly.

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