Excess reserve can be beneficial for -
1.Excess reserves are a safety buffer of sorts. Financial firms that carry excess reserves have an extra measure of safety in the event of sudden loan loss or significant cash withdrawals by customers.
2.This buffer increases the safety of the banking system, especially in times of economic uncertainty.
3.Excess Reserves can help in providing excess liquidity to a firm.
Cons of Excess reserve
1.Loss of opportunity as company is not able to deploy the excess money.
2. Return on investment is comapratively lesser as firm is not deploying excess money.
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