BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Cash Credit Ratio
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Debt Service Obligation
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Liquidity Adjustment Facility
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Statutory Liquidity Ratio
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Detailed explanation-1: -The correct answer is Statutory Liquidity Ratio. Commercial banks provide long-term credit to the government by investing their funds in government securities and short-term finance by purchasing Treasury Bills.
Detailed explanation-2: -Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public. However, commercial banks cannot use the entire amount of public deposits for lending purposes.
Detailed explanation-3: -1. Credit to Deposit Ratio: This measures the bank’s total credit in relation to its total deposits in the bank. This helps in analyzing the bank’s liquidity position.
Detailed explanation-4: -RBI has kept 40% as the maximum limit for SLR. SLR is calculated as a percentage of all the deposits held by the bank. Another way to define the SLR meaning is the ratio of a bank’s liquid assets to its net demand and time liabilities. (NDTL).
Detailed explanation-5: -The credit creation process of commercial banks is determined by the amount of initial deposits and the cash reserve ratio.