BK. I

28 A TREATISE ON MONEY

position to obtain command of an increased quantityof cash.

But any given banker will not only require cask tomeet suck a contingency. Even wken ke is moving instep witk kis neigkbours, tkere will be day-to-daydifferences between kis claims on tkem and tkeir claimson kim, and tke magnitude of tkese daily differenceswill partly depend on tke scale of kis busmess, wkickmay be rougkly measured by tke volume of kisdeposits. Accordingly, in order to deal witk tke in-evitable minor discrepancies wkick are bound to occurover skort periods, a banker will always maintainsome liquid resources in hand, partly in tke form ofcask and partly in tke form of deposits witk someother bank or banks—wkick resources, called kis“ reserves ”, rise and fall witk tke volume of kisdeposits and sometimes, by law or custom, are in arigid ratio to tkem. To deal witk inter-bank claims,tke banks have set up an office called tke ClearingHouse, wkick calculates each day kow muck is dueon balance to (or from) any bank from (or to) otherbanks. For the purpose of settling tke eventualdifferences cask could, if necessary, be used ; but asa matter of convenience tke banks generally acceptfor tke purpose of day-to-day settlements a claim ona single selected bank—tke Banker’s Bank as it issometimes called—wkick is usually tke Central orState Bank. Moreover a Central Bank deposit is notonly available to meet Clearing House differences, butcan also be encashed wken tke cask portion of abank’s reserves need replenishment.

A bank must, therefore, first of all decide whatamount of reserves it will be prudent to aim at—or,sometimes, it has this matter decided for it by law.Tke figure, wkick we shall discuss in detail in Volumeii., will depend partly on tke habits of tke depositors,as governed by tke practices of tke country and ofthe period and by tke class of business conducted