EconomicsMacro Economics: Money and Banking

Three of the following are names for the same ratio fixed by the RBI.…

Three of the following are names for the same ratio fixed by the RBI. Which one is the odd one out?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Statutory Liquidity Ratio

Required Reserve Ratio, Reserve Ratio and Cash Reserve Ratio are three names for one ratio: the percentage of deposits that every bank must keep as reserves, fixed by the RBI.

The Statutory Liquidity Ratio (SLR) is a separate requirement. Apart from the CRR, banks must also keep some reserves in liquid form in the short term.

NCERT (2026-27): “3.3.2 Limits to Credit Creation and Money Multiplier … The RBI decides a certain percentage of deposits which every bank must keep as reserves. This is done to ensure that no bank is ‘over lending’. This is a legal requirement and is binding on the banks. This is called the ‘Required Reserve Ratio’ or the ‘Reserve Ratio’ or ‘Cash Reserve Ratio’ (CRR).
Cash Reserve Ratio (CRR) = Percentage of deposits which a bank must keep as cash reserves with the 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. …”