The ratio that the banks are required to maintain between their liquid assets and total deposits is called

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  1. CRR (cash reserve ratio)
  2. SLR (statutory liquidity ratio)
  3. CAR (capital adequacy ratio)
  4. More than one of the above

Answer (Detailed Solution Below)

Option 2 : SLR (statutory liquidity ratio)
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The Correct answer is SLR (statutory liquidity ratio)

Key PointsExplanation:

  • Statutory Liquidity Ratio (SLR) is the portion of time (fixed deposits) and demand liabilities (savings bank and current accounts) of banks that they should keep in the form of designated liquid assets like government securities, gold and Vault Cash.
  • SLR aims at ensuring that the need for government funds is partly but surely met by the banks.
  • The maximum limit is 40% according to the Reserve Bank of India Act and Banking Regulation Act.
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