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Consider the following statements with reference to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR):

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Consider the following statements with reference to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR):
  • ACRR is the fraction of the total Net Demand and Time Liabilities maintained by bank with itself in form of cash deposits.
  • BSLR is the fraction of the total Net Demand and Time Liabilities maintained by bank with RBI in form of specified liquid assets.
  • CCRR and SLR are part of Liquidity Adjustment Facility (LAF). Which of the statements given above is/are correct? 1). 1 and 2 only 2). 3 only 3). 1, 2 and 3 4). None of the above
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Cash Reserve Ratio refers to the fraction of the total Net Demand and Time Liabilities (NDTL) of a Scheduled Commercial Bank held in India, that it has to maintain as cash deposit with the Reserve Bank of India (RBI). Hence statement 1 is wrong.

The Statutory Liquidity Ratio (SLR) is a prudential measure under which all Scheduled Commercial Banks in India must maintain an amount in one of the following forms as a percentage of their total Demand and Time Liabilities (DTL) / Net DTL (NDTL); Cash; Gold; Or Investments in un-encumbered Instruments. In contrast to the CRR, under which banks have to maintain cash with the RBI, the SLR requires holding of assets in one of the above three categories by the bank itself. Thus statement 2 is wrong too.

Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money through repurchase agreements or repos. LAF is used to aid banks in adjusting the day to day mismatches in liquidity (frictional liquidity deficit/surplus). Both SLR and CRR are not part of Liquidity adjustment facility. Hence statement 3 is wrong too.