Cash Reserve is a specified minimum function of the total deposites of customers, which commercial bank have to hold as reserves either in cash or as deposits with the Central bank. The aim here is to ensure that banks do not run and of cash to meet the payment demands of their depositors. 

Factors determining cash reserve : - 

(a) Nature of Accounts – Bank offers three kinds of accounts as current, saving and fixed deposit accounts. 

(b) Nature of Business – The bank must assets the nature of business of its account holders.

(c) Size of deposits – The bank should keep large amount of cash reserve. If the account holders deposit large sum of money. 

(d) Use of credit Instruments – The bank should keep high level of cash reserve where people use cheques and credit card. 

(e) Clearing house facility – If clearing house facility available then smaller amount of the cash will be required of because the banks will have to pay the difference of the cheques drown upon them. 

(f) Area of operation – The area of operations also affects the cash reserve. If bank is located in a city more cash reserve will be required than a bank located in a rural area. 

(g) Saving habits – The bank will have to keep high level of cash return where people use money unnecessity and where extra vagance in cash. 

(h) Government requirement – In most of the countries where central bank sets the minimum amount of cash reserve that must be maintain by Commercial Bank.