Economics • Banking & FinanceMedium
What is the statutory minimum percentage of total deposits that commercial banks in India must maintain in liquid assets under the Statutory Liquidity Ratio (SLR)?
A. Maintained as a cash balance with the Reserve Bank of India only
B. Maintained in approved securities like government bonds, gold, or cash over and above the cash reserve ratio✓ Correct Answer
C. Maintained exclusively as foreign exchange reserves with international central banks
D. Maintained as unencumbered loans extended to priority sector agricultural borrowers
💡 Solution & Explanation
Under Section 24 of the Banking Regulation Act, 1949, scheduled commercial banks must maintain a specified percentage of their net demand and time liabilities in unencumbered liquid assets such as cash, gold, or approved government securities, known as the Statutory Liquidity Ratio. This ensures banks maintain adequate solvency and liquidity. Other choices confuse SLR with CRR or foreign exchange reserve mandates. It acts as an additional prudential safeguard for depositors.
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