Question

............... is the rate which commercial bank needs to maintain in the form of cash securities (Bonds) before providing credit to its customers.

• A. Reverse Repo Rate
• B. Repo Rate
• C. CRR Rate
• D. SLR Rate

Hint:

Remember: SLR = Liquid assets held by banks to stay solvent and control credit growth.

Answer 1

The Correct Option is D

SLR stands for Statutory Liquidity Ratio.
It is the percentage of a bank’s total demand and time liabilities that must be maintained in the form of liquid assets such as cash, gold, or approved government securities (bonds).
SLR ensures that banks maintain enough liquid assets to meet any sudden demand from depositors and also to regulate the expansion of credit by the banks.
Before extending credit to customers, banks are required to maintain this proportion with themselves and not lend it out.
The CRR (Cash Reserve Ratio) is also a reserve but it is maintained in cash with the RBI — not in securities like bonds.
Repo Rate and Reverse Repo Rate are policy rates for borrowing and lending between banks and the RBI, not reserve ratios.
Therefore, option (D) SLR Rate is the correct answer as it directly refers to the mandatory securities reserve before lending.