Economics • Banking & FinanceEasy
What is the statutory minimum percentage of total deposits that commercial banks must maintain in liquid assets under the Statutory Liquidity Ratio (SLR)?
A. Determined solely by individual bank boards without RBI bounds
B. Maintained in the form of cash, gold, or approved securities as mandated by the RBI Act✓ Correct Answer
C. Fixed permanently at zero percent by the Banking Regulation Act
D. Applicable only to foreign banks operating in India
💡 Solution & Explanation
Statutory Liquidity Ratio mandates that commercial banks hold a specified minimum percentage of their net demand and time liabilities in liquid assets like government securities, gold, or cash. Regulated under the Banking Regulation Act, this instrument enables the Reserve Bank of India to control credit expansion and ensure solvency within the banking system. It functions independently of the Cash Reserve Ratio, which requires funds to be parked directly with the central bank. Regular revisions of the SLR rate serve as a critical tool for macroprudential policy regulation.
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