Question

Consider the following objectives:
1) To restrict the expansion of bank credit.
2) To augment the investment of the banks in government securities.
3) To ensure solvency of banks.
Which of the objectives given above are the main objectives of the Statutory Liquidity Requirements (SLRs)?

• A. 1 and 2
• B. 1 and 3
• C. 2 and 3
• D. All of these

Answer 1

The correct option is D All of these

Statutory Liquidity Ratio (SLR) refers to the percentage of money which the banks have to set aside and invest in gold or RBI approved securities. It is maintained by the banks with themselves and restricts the banks' leverage in pumping more money into the economy. This is to ensure the solvency of banks and also augment the investment of the banks in Govt securities. SLR also restricts expansion of credit thereby controlling inflation.