Question

36. Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

• A. a) Cash Credit Ratio
  
• B. b) Debt Service Obligation
  
• C. c) Liquidity Adjustment Facilities
  
• D. d) Statutory Liquidity Ratio

Answer 1

The correct option is D d) Statutory Liquidity Ratio

D)

Explanation:

SLR (Statutory Liquidity Ratio) is the ratio used by the RBI as a monetary tool. Banks prefer to keep a part of the prescribed ratio in the form of treasury bills, thus financing the government’s short term borrowing.