ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a) Statutory Liquidity Ratio
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b) Cash Reserve Ratio
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c) Reverse Repo
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d) None of These
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Unattempted
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Detailed explanation-1: -Every financial institution has to maintain a certain quantity of liquid assets with themselves at any point of time of their total time and demand liabilities. These assets have to be kept in non-cash form such as precious metals, approved securities like bonds etc.
Detailed explanation-2: -Explanation: SLR refers to a designated minimum proportion of its total assets to be maintained by the commercial banks in liquid assets such as gold, cash and unencumbered approved securities.
Detailed explanation-3: -CRR is kept in the form of cash and that also with the RBI. No interest is paid on such reserves. On the other hand, SLR is the percentage of deposit that the banks have to keep as liquid assets in their own vault. The CRR is a more active and useful monetary policy tool compared to the SLR.
Detailed explanation-4: -This is the RBI’s way of controlling the excess flow of money in the economy. The cash balance that is to be maintained by scheduled banks with the RBI should not be less than 4% of the total NDTL, which is the Net Demand and Time Liabilities.