Explanation:

• The Basel Committee on Banking Supervision (BCBS) introduced a leverage ratio in the 2010 Basel III package of reforms. The leverage ratio is defined as the capital measure divided by the exposure measure, expressed as a percentage. The leverage ratio measures a bank's core capital to its total assets. The ratio uses tier 1 capital to judge how leveraged a bank is in relation to its consolidated assets. Hence statement 1 is correct.
• Minimum Leverage Ratio of banks is decided by the Reserve Bank of India (RBI). The RBI in 2019, relaxed the leverage ratio (LR) for banks in a bid to help them expand their lending activities. The leverage ratio stands reduced to 4% for Domestic Systemically Important Banks (DSIBs) and 3.5% for other banks. Leverage ratio is also one the four indicators under the RBI’s Prompt Corrective Action framework. Hence statement 2 is not correct.
• The higher the tier 1 leverage ratio, the higher the likelihood of the bank withstanding negative shocks to its balance sheet. However, a higher LR will reduce bank's lending capacity. Relaxation in LR for banks will help them in expanding their lending activities. Hence statement 3 is correct.
• Hence option (a) is the correct answer.
• Leverage Ratio for a firm: A leverage ratio is any kind of financial ratio that indicates the level of debt incurred by a business entity against several other accounts in its balance sheet, income statement, or cash flow statement. These ratios provide an indication of how the company’s assets and business operations are financed (using debt or equity).