Discussion
How much percentage of its funds is required to be invested by payments banks in government securities or T-bills with maturity up to 1 year?
Answer: D
Correct answer: 75%
At least 75 per cent of demand deposits must be held in Statutory Liquidity Ratio-eligible government securities or treasury bills of maturity up to one year. The short maturity limits interest rate risk, and the requirement together with the 25 per cent that may sit with scheduled commercial banks accounts for the whole of the deposit base - which is precisely why no lending is possible.
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