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The Government of India made it obligatory on the part of all commercial banks that they should give some cash amount while purchasing Government bonds. What would you call this?
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- Statutory Liquidity Ratio
- Cash Reserve Ratio
- Minimum Reserve Ratio
- Floating Reserve Ratio
- Statutory Liquidity Ratio
Correct Option: A
Statutory liquidity ratio is the amount of liquid assets such as precious metals (Gold) or other approved securities, which a financial institution must maintain as reserves other than the cash. The statutory liquidity ratio is a term most commonly used in India. The objectives of SLR are to restrict the expansion of bank credit. They serve to augment the investment of the banks in government securities and ensure solvency of banks.
