Banks and other financial institutions in India are required to maintain a certain amount of liquid assets like cash, precious metals and other short-term securities as a reserve all the time. In Banking World this is known as

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	CRR
B	Fixed Asset
C	SLR
D	PLR

Explanation:

Detailed explanation-1: -Every bank in India must maintain a particular amount of Net Demand and Time Liabilities (NSTL) in the form of gold, cash, or other liquid assets. The ratio to the time liabilities and assets is called the statutory liquidity ratio.

Detailed explanation-2: -To remain viable, a financial institution must have enough liquid assets to meet withdrawals by depositors and other near-term obligations. Capital is the difference between all of a firm’s assets and its liabilities. Capital acts as a financial cushion to absorb losses.

Detailed explanation-3: -Banks in India are required to keep a minimum of 4% of their net demand and time liabilities (NDTL) in the form of cash with the RBI. These currently earn no interest. The CRR needs to be maintained on a fortnightly basis, while the daily maintenance needs to be at least 95% of the required reserves.

Detailed explanation-4: -In that case, any multiple of an optimal portfolio is also optimal, implying that the size of the bank is indeterminate. In turn, this implies that the amount of liquid assets is independent of bank size.

Detailed explanation-5: -Liquidity provision is commonly understood as acting as an intermediary by continually trading in and out of relatively short-term positions.

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