When the Statutory Liquidity Ratio is reduced which are the likely impacts 1 Banks wi...........

Economic Affairs Types of Banks and Banking

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When the Statutory Liquidity Ratio is reduced which are the likely impacts?

1. Banks will have more money to invest in other sectors of economy.

2. Government will be able to borrow less and will help in fiscal consolidation.

Choose the correct codes:

1 only

2 only

Both 1 and 2

Neither 1 or 2

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Explanation:

Both the statements are correct if we reduce Statutory Liquidity Ratio.
Statutory liquidity ratio (SLR) is the Indian government term for reserve requirement that the commercial banks in India require to maintain in the form of gold, government approved securities before providing credit to the customers. Statutory Liquidity Ratio is determined by Reserve Bank of India maintained by banks in order to control the expansion of bank credit.