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Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government? Correct Answer Statutory Liquidity Ratio

The correct answer is Statutory Liquidity Ratio.

Key Points

  •  Statutory Liquidity Ratio(SLR):-
    • Commercial banks provide long-term credit to the government by investing their funds in government securities and short-term finance by purchasing Treasury Bills. This comes under SLR.

Additional Information

  • Cash Reserve Ratio(CRR):-
    • CRR is a specific part of the total deposit that is held as a reserve by the commercial banks mandated by RBI.
    • This reserve must be reserved in cash or cash equivalent.
  • Liquidity Adjustment Facility:-
    • A liquidity adjustment facility (LAF) is a tool used in monetary policy, primarily by the Reserve Bank of India (RBI) that allows banks to borrow money through repurchase agreements or to make loans to the RBI through reverse repo agreements.
  • Debt Service Obligation:-
    • Debt service is the cash that is required to cover the repayment of interest and principal on a debt for a particular period.

Related Questions

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2. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.
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Courses of Action :
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Select the correct answer:
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1. Payment bank cannot issue credit cards.
2. There is a limit on maximum balance of individual customer in payment bank.
3. SLR requirements for payment banks and small banks is less than commercial banks.
4. Priority sector lending up to 40% is mandatory for both private banks and small banks.
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1. They are regulated under Banking Regulation Act 1949.
2. It is mandatory for all scheduled commercial banks, local area banks, Primary (Urban) co-operative banks (UCBs), state co-operative banks and central co-operative banks in India to maintain the SLR.
3. Banks get a return on SLR.
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