Under Statutory Liquidity Ratio (SLR) all Scheduled Commercial Banks in India must maintain an amount in which of the following forms?
1. Cash
2. Gold
3. Treasury-Bills of the Government of India
4. Corporate Bonds
5. State Development Loans (SDLs)
Select the correct answer using the code given below:
1, 2 and 3 only
Incorrect Answer1, 2, 3 and 5 only
Correct Answer1, 2 and 5 only
Incorrect Answer1, 2, 3, 4 and 5
Incorrect AnswerExplanation:
The Statutory Liquidity Ratio (SLR) is a prudential measure under which (as per the Banking Regulations Act 1949) all Scheduled Commercial Banks in India must maintain an amount in one of the following forms as a percentage of their total Demand and Time Liabilities (DTL) / Net DTL (NDTL); Cash., Gold; orInvestments in un-encumbered Instruments that include;
(a) Treasury-Bills of the Government of India.
(b) Dated securities including those issued by the Government of India from time to time under the market borrowings programme and the Market Stabilization Scheme (MSS).
(c) State Development Loans (SDLs) issued by State Governments under their market borrowings programme.
(d) Other instruments as notified by the RBI.
If a bank fails to meet its SLR obligation, a penalty in the form of a penal interest payable is imposed.
SLR is also a tool for controlling liquidity in the domestic market via manipulating bank credit. A rise in SLR locks up an increasing portion of a bank’s assets in the above three categories and may squeeze out bank credit.
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By: Abhishek Sharma