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What is the purpose of the Statutory Liquidity Ratio (SLR) set by the RBI?
  • a)
    To maintain price stability
  • b)
    To control inflation
  • c)
    To regulate the expansion of bank credit
  • d)
    To manage foreign exchange
Correct answer is option 'C'. Can you explain this answer?
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What is the purpose of the Statutory Liquidity Ratio (SLR) set by the ...
The Statutory Liquidity Ratio (SLR) is set by the RBI to regulate the expansion of bank credit. SLR is the minimum percentage of assets, such as gold or government-approved securities, that commercial banks are required to maintain before providing credit to customers. By increasing the SLR, the RBI reduces the flow of credit in the economy as banks have to keep a larger proportion of their deposits in non-cash form. This helps in controlling inflation and ensuring the stability of the financial system.
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What is the purpose of the Statutory Liquidity Ratio (SLR) set by the RBI?a)To maintain price stabilityb)To control inflationc)To regulate the expansion of bank creditd)To manage foreign exchangeCorrect answer is option 'C'. Can you explain this answer?
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