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The banks are required to maintain a certain ratio between their liquid assets and their total demand and time liabilities. This is called the

  • A.Statutory Bank Ratio (SBR)
  • B.Statutory Liquidity Ratio (SLR)
  • C.Central Bank Reserve (CBR)
  • D.Central Liquid Reserve (CLR)

Answer: B

This is the Statutory Liquidity Ratio.

Every bank must hold a prescribed proportion of its net demand and time liabilities in cash, gold or approved securities. Raising the SLR leaves less for lending and so contracts credit. The Cash Reserve Ratio, kept with the RBI in cash, is the companion instrument.

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