ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.

Detailed explanation-2: -The correct option is C Cash reserve ratio. As a part of the monetary policy, there are certain reserve requirements that a commercial bank has to follow. The minimum reserve maintained with the Reserve Bank of India (RBI) is called the cash reserve ratio or the CRR.

Detailed explanation-3: -Cash Reserve Ratio (CRR) is the percentage of money, which a bank has to keep with RBI in the form of cash. Whereas, Statutory Liquidity Ratio (SLR) is the proportion of liquid assets to time and demand liabilities.

Detailed explanation-4: -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-5: -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.