Question

In case of crisis where commercial banks run out of reserves, RBI stands by the commercial banks as a _________? Legal authority Lender Saviour Guarantor

Answer 1

Each commercial bank is required to maintain certain portion of their Net Demand and Time Liabilities (NDTL) in the form of cash with the Reserve Bank, called Cash Reserve Ratio (CRR) and in the form of investment in approved securities, called Statutory Liquidity Ratio (SLR). These are called statutory Pre-emptions.