BANKING AFFAIRS

BANKING GENERAL KNOWLEDGE

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

Which of the following comes under Statutory Pre-emotions?

A	Cash Reserve Ratio
B	Statutory Liquidity Ratio
C	Both A and B
D	None

Explanation:

Detailed explanation-1: -This percentage is called the Statutory Liquidity Ratio (SLR). In our example, if the RBI mandates the banks to maintain an SLR of 20%, then the bank will keep Rs 2 Lakh in liquid assets and will be able to loan out only the remaining Rs 8 Lakh.

Detailed explanation-2: -How to calculate the statutory liquidity ratio? The SLR of a commercial bank is evaluated as the percentage value of the bank’s liquid assets divided by an aggregate of its net demand and time liabilities. It is computed using the following formula: SLR = [Liquid Assets / (Net Demand + Time Liabilities)] × 100.

Detailed explanation-3: -SLR Formula SLR = (liquid assets / (demand + time liabilities)) * 100%.

Detailed explanation-4: -Objectives of SLR 1) One of the main objectives is to prevent commercial banks from liquidating their liquid assets when the RBI raises the CRR. 2) SLR is used by the RBI to control credit flow in the banks. 3) In a way, SLR also makes commercial banks invest in government securities.

There is 1 question to complete.