2. Why do banks keep a small proportion of the deposits as cash withthemselves (set 1)
Banks keep a small portion of the deposits as cash with themselves to help facilitate withdrawal of cash by the account holders. Clients deposit money with the banks in their current accounts and savings accounts. Not everybody withdraws the entire amount from his account on a given day. The banks therefore, based on the amount specified by RBI, keep a certain percentage of deposits with them and use the rest for other activities like extending loans.