SLR is defined as :
Answer & explanation
Correct answer: option 2
The correct answer is option (2) : Keeping some reserves in liquid form in the short term in bank
Apart from the CRR, banks are also required to keep some reserves in liquid form in the short term. This ratio is called Statutory Liquidity Ratio or SLR.
Why other options are Incorrect?
Option 1: Percentage of deposits which a bank must keep as cash reserves:This defines CRR, not SLR. CRR is maintained as cash with RBI, while SLR is in liquid assets with the bank.
Option 3: Reserve of cash reserve ratio in the short term. No such concept exists.
Option 4: Buying or selling of bonds in the short term: This refers to Open Market Operations (OMO) by RBI.