New SIDBI Grade A New Batch Starts on Nov 18

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    Question

    In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’? 

    1. To enable the Central Bank to control the amount of advances the banks can create

    2. To make the people’s deposits with banks safe and liquid 

    3. To prevent the commercial banks from making excessive profits

    4. To force the banks to have sufficient vault cash to meet their day-to-day requirements

    Select the correct answer using the code given below.

    A 1 only Correct Answer Incorrect Answer
    B 1 and 2 only Correct Answer Incorrect Answer
    C 2 and 3 only Correct Answer Incorrect Answer
    D 1, 2, 3 and 4 Correct Answer Incorrect Answer
    E 2 only Correct Answer Incorrect Answer

    Solution

    1 is definitely correct as CRR. SLR is used to control money supply and credit off take. 2 may or may not be correct, to make people's deposit safe, capital adequacy ratio is the norm. 3 is definitely wrong as to control excess profit, margins would have to be reduced, not CRR, SLR.

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