Commercial Applications
The Statutory Liquidity Ratio (SLR) requires commercial banks to maintain a certain percentage of their liabilities in liquid assets, which can include government securities.
- True
- False
Banking
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Answer
True
Reason — Under the Statutory Liquidity Ratio (SLR), commercial banks have to keep a certain percentage of their demand and time liabilities in liquid form, consisting of cash and government securities. When the central bank raises the SLR, banks have to keep more liquid assets, reducing their capacity to grant credit; lowering the SLR expands credit.
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Related Questions
Which of the following is/are the function(s) of central bank?
- Banker's bank
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- Receive deposits from the public and business firms
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It means signing on the back of the negotiable instrument with the objective of transferring its ownership.
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A commercial bank is considering increasing its lending to small businesses. Which of the following actions by the Central Bank would most likely constrain the bank's ability to do so?
- Reducing the Statutory Liquidity Ratio (SLR).
- Increasing the Cash Reserve Ratio (CRR).
- Lowering the Bank Rate.
- Conducting open market operations to purchase government securities.
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- True
- False