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

Practice Questions

Q1
What is the significance of the SLR (Statutory Liquidity Ratio)?
  1. It determines the minimum cash reserves for banks
  2. It regulates the amount of gold banks must hold
  3. It ensures banks maintain a certain percentage of liquid assets
  4. It controls the interest rates on loans

Questions & Step-by-Step Solutions

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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