Q. What is the primary reason for banks maintaining Margin Requirements?
Answer: To maintain a buffer against the reduction in value of security
Notes: Margin Requirements are primarily maintained by banks as a safety net against fluctuations in the value of securities. In case the value of security declines, banks have a backup to fall on. This system ensures financial stability and reduces the risk of potential losses. By having minimal levels of the margin, the bank insulates itself from drastic market downturns.

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