Multiple choice

CRR and SLR tend to ensure the liquidity and solvency of the bank. Consider the following statements in the light of this:

(a) CRR tends to impound a certain portion of available lendable funds with commercial bank in case from RBI. (b) SLR is an obligation on the part of commercial bank to maintain quite a good chunk of their resources in liquid shape, viz. gold cash and approve securities, thereby curtailing their lending or in other words, exposure in loan portfolio. (c) Imposing CRR + SLR only ensures a stable govt. approved securities market in the country.

Which of the above is/are correct?

  1. (a) only

  2. (a) and (b) only

  3. (c) only

  4. (a) and (c) only

  5. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

CRR and SLR are tools with RBI aimed at curtailing the lendable resources of banks. On the other hand, banks have to park some percentage of their NDTL with RBI under CRR and under SLR, quite a good percentage of their NDTL is in liquid assets readily convertible in case of an emergency. Hence, these ratios ensure solvency and liquidity of banks.

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