Every bank is required to maintain a fixed percentage of its assets in the form of cash or other liquid assets, it is called _________
Which of the following options suits best in the above blank?
Answer & explanation
Correct answer: option 2
The correct answer is option 2: statutory liquidity ratio
The statutory liquidity ratio (SLR) refers to the percentage of a bank's net demand and time liabilities (NDTL) that it must maintain in the form of cash, gold, or other approved securities. This ensures that banks have sufficient liquid assets to meet their obligations.
- Cash Reserve Ratio (CRR) refers to the percentage of a bank's total deposits that must be maintained as reserves in cash with the central bank.
- Bank Rate is the rate at which the central bank lends to commercial banks.
- Margin Requirement refers to the minimum amount of equity that must be provided by borrowers when obtaining a loan.