Banks generally borrow funds from which of the following money markets to meet the mandatory Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements as stipulated by the Central bank?

BANKING GENERAL KNOWLEDGE

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

A	Notice Money Market
B	Call Money Market
C	Bill Market
D	Money Market

Explanation:

Detailed explanation-1: -Call money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. The interest rate paid on call money loans is known as the call rate. It is a highly volatile rate.

Detailed explanation-2: -CRR is a reserve maintained by banks with the RBI. It is a percentage of the banks’ deposits maintained in cash form. SLR is an obligatory reserve that commercial banks must maintain themselves. It is a percentage of commercial banks’ net demand and time liabilities, maintained as approved securities.

Detailed explanation-3: -Every scheduled bank, small finance bank and payments bank shall maintain minimum CRR of not less than ninety per cent of the required CRR on all days during the reporting fortnight, in such a manner that the average of CRR maintained daily shall not be less than the CRR prescribed by the Reserve Bank.

Detailed explanation-4: -Currently, the statutory liquidity ratio rate is 18%. (As on August 27, 2020). RBI has kept 40% as the maximum limit for SLR. SLR is calculated as a percentage of all the deposits held by the bank.

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