consider the following statement regarding Cash reserve ratio and Statutory Liquidity Ratio SLR 1 CR...........

Economic Affairs Money Supply and Monetary Policy

consider the following statement regarding Cash reserve ratio and Statutory Liquidity Ratio( SLR)

1: CRR is the fraction of the total Net demand and Time Liabilities maintained by bank's with itself in form of cash

2: SLR is the fraction of the total Net demand and Time Liabilities maintained by bank's with RBI form of specified liquid assets

3: CRR and SLR are part of Liquidity Adjustment Facility(LAF)

1 and 2

3 only

1,2 and 3

none

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Explanation:

Statement 1 is not correct. Cash Reserve Ratio refers to the fraction of the total Net Demand and Time
Liabilities (NDTL) of a Scheduled Commercial Bank held in India, that it has to maintain as cash deposit with
the Reserve Bank of India (RBI).

Statement 2 is not correct. 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);
[i] Cash
[ii] Gold
[iii] Investments in un-encumbered Instruments

In contrast to the CRR, under which banks have to maintain cash with the RBI, the SLR requires holding of
assets in one of the above three categories by the bank itself.

Statement 3 is not correct. Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks
to borrow money through repurchase agreements or repos. LAF is used to aid banks in adjusting the day to
day mismatches in liquidity (frictional liquidity deficit/surplus). Both SLR and CRR are not part of Liquidity
adjustment facility.