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Qualitative Instruments

Which of the ...

Question

Which of the following terms indicates mechanism used by commercial banks for providing credit to Government?

A

Cash Credit Ratio

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B

Debt Service Obligation

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C

Liquidity Adjustment Facility

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D

Statutory Liquidity Ratio

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Solution

The correct option is D Statutory Liquidity Ratio
Statutory Liquidity Ratio (SLR) is the mechanism used to by the RBI to regulate the liquidity of the commercial banks. Under SLR, commercial banks invest a certain percentage of their money in Government securities and other assets like gold so as to comply with RBI guidelines.

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