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Consider the following statements about Statutory Liquidity Ratio (SLR):
1. It includes cash and gold.
2. Banks may earn returns on money parked as SLR
Which of the statements given above is/are correct?
1. It includes cash and gold.
2. Banks may earn returns on money parked as SLR
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements aboutStatutory Liquidity Ratio (SLR)...
Statutory Liquidity Ratio (SLR)
The Statutory Liquidity Ratio (SLR) is the percentage of a bank's Net Demand and Time Liabilities (NDTL) that it needs to maintain in the form of liquid assets such as cash, gold, and approved securities. It is a prudential regulation imposed by the Reserve Bank of India (RBI) on banks to ensure the stability and solvency of the banking system.
Statement 1: It includes cash and gold.
The first statement is correct. The SLR includes cash, gold, and approved securities. Banks are required to maintain a certain proportion of their NDTL as liquid assets, and these assets can include cash, gold, and government securities. However, the SLR does not include all the assets held by a bank, but only those that meet the criteria specified by the RBI.
Statement 2: Banks may earn returns on money parked as SLR
The second statement is also correct. Banks are allowed to earn returns on the money parked as SLR. While maintaining the SLR, banks invest their excess funds in government securities, which are considered safe and provide a return on investment. This allows banks to earn income on the funds that they are required to hold as liquid assets. The returns earned on SLR investments help banks enhance their profitability and manage their liquidity position effectively.
Conclusion
Both statements 1 and 2 are correct. The SLR includes cash, gold, and approved securities, and banks are allowed to earn returns on the money parked as SLR. The SLR requirement serves as a prudential measure to ensure that banks maintain a certain level of liquidity and stability in their operations. It also helps the central bank in regulating the money supply and managing inflation in the economy.
The Statutory Liquidity Ratio (SLR) is the percentage of a bank's Net Demand and Time Liabilities (NDTL) that it needs to maintain in the form of liquid assets such as cash, gold, and approved securities. It is a prudential regulation imposed by the Reserve Bank of India (RBI) on banks to ensure the stability and solvency of the banking system.
Statement 1: It includes cash and gold.
The first statement is correct. The SLR includes cash, gold, and approved securities. Banks are required to maintain a certain proportion of their NDTL as liquid assets, and these assets can include cash, gold, and government securities. However, the SLR does not include all the assets held by a bank, but only those that meet the criteria specified by the RBI.
Statement 2: Banks may earn returns on money parked as SLR
The second statement is also correct. Banks are allowed to earn returns on the money parked as SLR. While maintaining the SLR, banks invest their excess funds in government securities, which are considered safe and provide a return on investment. This allows banks to earn income on the funds that they are required to hold as liquid assets. The returns earned on SLR investments help banks enhance their profitability and manage their liquidity position effectively.
Conclusion
Both statements 1 and 2 are correct. The SLR includes cash, gold, and approved securities, and banks are allowed to earn returns on the money parked as SLR. The SLR requirement serves as a prudential measure to ensure that banks maintain a certain level of liquidity and stability in their operations. It also helps the central bank in regulating the money supply and managing inflation in the economy.
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Community Answer
Consider the following statements aboutStatutory Liquidity Ratio (SLR)...
Both statements are correct. SLR includes cash, gold and other government securities. Banks are eligible to earn interest on SLR .
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Consider the following statements aboutStatutory Liquidity Ratio (SLR):1. It includes cash and gold.2. Banks may earn returns on money parked asSLRWhich of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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