If a commercial bank has total deposits of ₦500,000 and the cash reserve ratio is 20%, the maximum amount the bank can create as new loans is

With a cash reserve ratio of 20%, the bank must keep ₦100,000 (20% of ₦500,000) as reserves. The remaining ₦400,000 (₦500,000 − ₦100,000) is available for lending as new loans. The credit multiplier effect applies to the system as a whole, but the question asks for the maximum new loans from this single bank's excess reserves.