What is Statutory Liquidity Ratio (SLR)?

Correct option is A

The correct answer is (a) It's the percentage of deposits that banks must keep in liquid form in the short term.
· Statutory Liquidity Ratio (SLR) is a requirement that banks are supposed to maintain a certain percentage of their net demand and time liabilities (NDTL) in the form of liquid cash, gold, or other securities. It is a regulation imposed by central banks to ensure that banks always have enough liquid assets available to meet their obligations.
Information Booster:
· Purpose: SLR helps to ensure the solvency of banks and curtail their ability to pump excessive money into the economy, which can help control inflation.
· Components: The assets maintained as SLR are typically easy to liquidate and include cash, precious metals, government-approved securities, and bonds.
· Impact on Economy: By regulating the amount of money banks can lend, SLR plays a crucial role in controlling credit growth in the economy.
· Regulatory Tool: It is one of several monetary policy tools used by the central bank to control the expansion of bank credit.