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    Question

    Which of the following is not considered for maintaining

    Statutory Liquidity Ratio (SLR) by   Scheduled Commercial Banks?
    A Gold Correct Answer Incorrect Answer
    B Treasury-Bills Correct Answer Incorrect Answer
    C State Development Loans (SDL) Correct Answer Incorrect Answer
    D Corporate Bonds Correct Answer Incorrect Answer
    E All are considered Correct Answer Incorrect Answer

    Solution

    The Statutory Liquidity Ratio (SLR) is a prudential measure under which (as per the Banking Regulations Act 1949) all Scheduled Commercial Banks in India must maintain an amount in one of the following forms as a percentage of their total Demand and Time Liabilities (DTL) / Net DTL (NDTL); ·         Cash. ·         Gold; or ·         Investments in un-encumbered Instruments that include; (a) Treasury-Bills of the Government of India. (b) Dated securities including those issued by the Government of India from time to time under the market borrowings programme and the Market Stabilization Scheme (MSS). (c) State Development Loans (SDLs) issued by State Governments under their market borrowings programme. (d) Other instruments as notified by the RBI. SLR is also a tool for controlling liquidity in the domestic market via manipulating bank credit. A rise in SLR locks up increasing portion of a bank’s assets in the above three categories and may squeeze out bank credit.

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