The deposit reserve ratio refers to the deposits deposited by financial institutions in the central bank to ensure the needs of customers to withdraw deposits and settle funds. Bank funds have customers' deposits, and the amount of deposits is certain. Bank loan funds are another part of customers' deposits. With the increase of bank reserve ratio, your bank needs to deposit more money in the central bank, resulting in a decrease in the amount of funds that banks can lend. For example, the customer deposit is 654.38 billion, and the reserve ratio is 20%. If the bank deposits 20 million in the central bank, it can only withdraw 80 million. If the reserve ratio is raised to 25%, loanable funds will become 75 million yuan. Of course, the amount of loans issued by banks will also decrease.

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