Question : The commercial banks of India have to maintain a minimum percentage of cash, gold and other securities before lending loans to their customers. This is called the ____________.
Option 1: Capital Adequacy Ratio
Option 2: Current Account and Savings Account Ratio
Option 3: Statutory Liquidity Ratio
Option 4: Cash Reserve Ratio
Correct Answer: Statutory Liquidity Ratio
Solution : The correct option is the Statutory Liquidity Ratio .
The practice of maintaining a minimum percentage of cash, gold and other approved securities as a proportion of their demand and time liabilities is known as the Statutory Liquidity Ratio (SLR). It is a regulatory requirement imposed by the central bank to ensure the liquidity and stability of commercial banks. In India, the current SLR rate is 18%. This means that banks must keep a minimum of 18% of their Net Demand and Time Liabilities (NDTL) in liquid assets.
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