What is the significance of the SLR (Statutory Liquidity Ratio)?

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Question: What is the significance of the SLR (Statutory Liquidity Ratio)?

Options:

Correct Answer: It ensures banks maintain a certain percentage of liquid assets

Solution:

The SLR ensures that banks maintain a certain percentage of liquid assets, promoting financial stability.

What is the significance of the SLR (Statutory Liquidity Ratio)?

What is the significance of the SLR (Statutory Liquidity Ratio)?

Step 1: Understand what SLR stands for - Statutory Liquidity Ratio.
Step 2: Know that SLR is a regulation set by the central bank (like the Reserve Bank of India).
Step 3: Learn that SLR requires banks to keep a certain percentage of their deposits in liquid assets.
Step 4: Recognize that liquid assets can include cash, gold, or government securities.
Step 5: Understand that maintaining SLR helps banks to be financially stable and able to meet customer withdrawals.
Step 6: Realize that SLR also helps control the expansion of credit in the economy.

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