The Reserve Bank of India sets the Cash Reserve Ratio (CR

The money multiplier = 1 ÷ CRR = 1 ÷ 0.10 = 10. Maximum money creation = Initial Deposit × Money Multiplier = ₹1,000 crore × 10 = ₹10,000 crore. This represents the theoretical maximum credit the banking system can create assuming all excess reserves are lent out with no cash leakages. The money multiplier works because every deposit in one bank becomes a loan, which becomes a deposit in another bank, amplifying the original amount. In practice, actual money creation is lower due to leakages such as public cash holdings, SLR requirements, and excess reserves maintained by banks.