Discussion
Main objective of CRR and SLR is to ensure
(i) Liquidity position of Bank
(ii) Financial position of Bank
(iii) Profit pOSition of Bank
Answer: A
Correct answer: Only (i) is correct
The cash reserve ratio and the statutory liquidity ratio are liquidity instruments. The CRR requires banks to hold a proportion of their net demand and time liabilities as cash with the RBI, and the SLR requires a further proportion in cash, gold or approved securities - together ensuring that a bank can meet withdrawals and that credit creation is contained.
They are not designed to secure a bank's financial or profit position. Indeed both work against profitability, since the funds they immobilise earn little or nothing compared with what lending them would return.
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