Question : Under the Statutory liquidity ratio, commercial banks are required to keep a fraction of ____ in the form of liquid assets.
Option 1: current deposits
Option 2: total demand and term deposits
Option 3: term deposits
Option 4: saving deposits
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Correct Answer: total demand and term deposits
Solution : The correct answer is total demand and term deposits.
The Statutory Liquidity Ratio (SLR) is a "monetary policy instrument" of the "RBI." This requires "commercial banks" to hold a specified percentage of total "demand" and "time deposits" as liquid assets in their vault. The goals of keeping the Statutory Liquidity Ratio (SLR) are to increase or decrease the flow of bank credit and to prevent commercial banks from "over-liquidating."
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