Reserves which can act as a liquidity buffer for commercial banks during crisis times are

BANKING GENERAL KNOWLEDGE

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

A	CAR
B	SLR
C	CAR and CRR
D	CRR and SLR

Explanation:

Detailed explanation-1: -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-2: -Cash reserve ratio and statutory liquidity ratio are not fixed by the commercial banks they are fixed by the central bank.

Detailed explanation-3: -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.

Detailed explanation-4: -CRR includes cash reserves only, but SLR includes liquid assets such as gold, bonds, and securities as well. No interest is earned on the funds reserved as CRR, but banks earn on SLR. CRR funds are kept with the RBI, but SLR funds are kept with the bank itself.

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