Question

Under Statutory Liquidity Ratio, commercial banks are required to keep
a fraction of..............
in the form of liquid assets.
(Choose the correct alternative)
(A) Total deposits
(B) Term deposits
(c)Total demand and term deposits
(D) Current deposits

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Answer 1

Answer:

(B) Term deposits.

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Answer 2

(c)Total demand and term deposits

Explanation:

• Section 24 & 56 of the "Banking Regulation Act 1949" mandates that all banks in India must maintain the "Statutory Liquidity Ratio" (SLR).
• The SLR is a "monetary policy instrument" of the "RBI". Under SLR, "commercial banks"  must keep a certain proportion of the  total "demand" & "time deposits" as liquid assets in their vault.
• The objectives of maintaining SLR are to increase/decrease the flow of bank credit and to curtail  commercial banks from "over liquidating"

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