Question

The part of LRR (Legal reserve ratio) kept by the banks with themselves is called

• A. SLR (Statutory liquidity ratio)
• B. CRR (Cash reserve ratio)
• C. Repo rate
• D. Reverse repo rate

Hint:

SLR (Statutory Liquidity Ratio) is the portion of a bank's reserves that must be kept in liquid assets, such as government securities, within the bank itself.

Answer 1

The Correct Option is A

Step 1: Understanding Reserve Requirements:
Commercial banks are required to keep a certain percentage of their deposits as reserves, which can be in the form of cash (CRR) or liquid assets like government securities (SLR). These reserves are maintained with the central bank and used to ensure the stability of the banking system.
Step 2: Analyzing the Options:
- Option (A) SLR (Statutory liquidity ratio): This is the correct answer. The SLR is the portion of a bank's reserves that must be kept in the form of liquid assets (e.g., government securities). These assets are held by the bank itself, not at the central bank.
- Option (B) CRR (Cash reserve ratio): The CRR is the portion of a bank’s reserves that must be kept in cash with the central bank. This is different from SLR, which involves liquid assets held by the banks themselves.
- Option (C) Repo rate: The repo rate is the interest rate at which commercial banks borrow from the central bank. It does not refer to reserves kept by the banks.
- Option (D) Reverse repo rate: The reverse repo rate is the rate at which commercial banks lend to the central bank, not related to the reserves kept by banks.
Step 3: Conclusion and Answer:
The correct answer is (A) because SLR refers to the portion of reserves that commercial banks must keep in liquid assets, like government securities, within their own holdings.