Commercial banks hold a fraction of their deposits in cash in their vaults (or as deposits with the central bank). This fraction is known as

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The fraction of deposits that commercial banks hold as reserves is known as the reserve ratio. This ratio is set by the central bank in order to control the money supply and ensure financial stability. The excess reserve ratio refers to the amount of reserves held by banks beyond the required amount, while fractional reserve refers to the practice of holding only a fraction of deposits as reserves. The required reserve is the amount of reserves that banks are legally required to hold. The target reserve is not a commonly used term in banking.

Commercial Banks Hold a Fraction of Their Deposits in Cash