Which out of the following is are correct regarding Statutory Liquidity Ratio SLR a Section 42 of RB...........

Economics- Phase (I & II) Monetary and Fiscal Policy

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Which out of the following is/are correct regarding Statutory Liquidity Ratio (SLR)?

a) Section 42 of RBI Act, 1934 lays foundation for maintaining SLR by scheduled commercial bank with RBI.
b) Section 24 of the Banking Regulations Act, 1949 provide powers to RBI to specify SLR on banks
c) At present SLR is 19.50 per cent of NDTL
d) Qualified liquid assets for purpose of SLR are: unencumbered government and other approved securities, gold, cash and excess CRR balance

Select the correct answer from following options:

Only a, b and c

Only b, c and d

Only a, c and d

Only b & d

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Explanation:

Only statements 2&4 are correct.

Statement 1st is incorrect: Section 24 and Section 56 of the Banking Regulation Act 1949 mandates all scheduled commercial banks, local area banks, Primary (Urban) co-operative banks (UCBs), state co-operative banks and central co-operative banks in India to maintain the SLR.

Statement 2nd is correct: Cash Reserve Ratio and Statutory Liquidity Ratio by the Scheduled Commercial Banks (SCBs), the Reserve Bank of India has prescribed statutory returns i.e. Form A return (for CRR) under Section 42 (2) of the RBI Act, 1934 and Form VIII return (for SLR) under Section 24 of the Banking Regulation Act, 1949.

Statement 3rd is incorrect: At present, banks have been granted a special dispensation of enhanced Held to Maturity (HTM) limit of 22 per cent of Net Demand and Time Liabilities (NDTL), for Statutory Liquidity Ratio (SLR) eligible securities acquired between September 1, 2020 and March 31, 2022, until March 31, 2023.

On a review, it has now been decided to further enhance the existing HTM limit of 22 per cent of NDTL to 23 per cent of NDTL and allow banks to include securities acquired between April 1, 2022 and March 31, 2023 under the enhanced limit of 23 per cent.

The enhanced HTM limit of 23 per cent shall be restored to 19.5 percent in a phased manner, begin-ning from the quarter ending June 30, 2023, i.e. the excess SLR securities acquired by banks during the period September 1, 2020 to March 31, 2023 shall be progressively reduced such that the total SLR se-curities held in the HTM category as a percentage of the NDTL do not exceed:

a. 22.00 per cent as on June 30, 2023
b. 21.00 per cent as on September 30, 2023
c. 20.00 per cent as on December 31, 2023
d. 19.50 per cent as on March 31, 2024 All other instructions shall remain unchanged.

Statement 4th is correct: SLR formula includes the following elements: Liquid Assets: These assets can be readily converted into cash. Gold, treasury bills, government-approved securities, government bonds, and cash reserves are liquid assets.

Note: Unencumbered refers to an asset or property that is free and clear of any encumbrances, such as creditor claims or liens. An unencumbered asset is much easier to sell or transfer than one with an encumbrance.

Hence option 4th is correct.