Question

Commercial banks in India are subject to a statutory liquidity requirement (SLR). Which of the following is not part of the SLR?

• A. Required reserves.
• B. Treasury bill.
• C. Unencumbered government and other approved securities.
• D. Current account balances with other banks.

Hint:

SLR includes liquid assets like government securities and cash, but not current account balances with other banks.

Answer 1

The Correct Option is D

Step 1: Understanding the statutory liquidity requirement (SLR).
SLR is the minimum percentage of a commercial bank's net demand and time liabilities (NDTL) that it must maintain in the form of liquid assets such as cash, gold, and government securities.

Step 2: Analysis of options.
- (A) Required reserves: This is correct. Banks must maintain reserves as part of their SLR.
- (B) Treasury bill: This is correct. Treasury bills are eligible assets for meeting SLR requirements.
- (C) Unencumbered government and other approved securities: This is correct. Government securities are part of SLR.
- (D) Current account balances with other banks: This is incorrect. Current account balances with other banks are not considered part of SLR as they are not liquid assets that can be used to meet the requirement.

Step 3: Conclusion.
The correct answer is (D), as current account balances with other banks are not part of the SLR.