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Consider the following statements with reference to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR): 1. CRR is the fraction of the total Net Demand and Time Liabilities maintained by bank with itself in form of cash deposits. 2. SLR is the fraction of the total Net Demand and Time Liabilities maintained by bank with RBI in form of specified liquid assets. 3. CRR and SLR are part of Liquidity Adjustment Facility (LAF). Which of the statements given above is/are correct?

Consider the following statements with reference to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR): 1. CRR is the fraction of the total Net Demand and Time Liabilities maintained by bank with itself in form of cash deposits. 2. SLR is the fraction of the total Net Demand and Time Liabilities maintained by bank with RBI in form of specified liquid assets. 3. CRR and SLR are part of Liquidity Adjustment Facility (LAF). Which of the statements given above is/are correct? Correct Answer None of the above

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.

Related Questions

Which of the following statements are correct in context of Statutory Liquidity Ratio (SLR)?
1. SLR consists of a certain percentage of liquid assets of NDTL.
2. Liquid assets for the purpose are those assets that one can easily convert into cash, gold, treasury bills, govt-approved securities, government bonds, and cash reserves.
3. SLR includes securities, eligible under Market Stabilization Schemes and those under the Market Borrowing Programmes.
4. The limit of SLR set is 0 to 40% of NDTL.
Credit creation capacity of a bank depends on the cash reserve ratio and statutory liquidity ratio.
If the initial deposit (O) is Rs. 1,000 and the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) is 5% and 20%, then the credit creation capacity will be as follows
Match the items of List I with the items of List II and choose the correct answer from the code given below.   List I    List II (a)  NPA (i)  The percentage of deposits to be kept with RBI  in the form of cash. (b)  SLR (ii)  The rate at which RBI lends money to   commercial banks.  (c)  Repo Rate   (iii)  Loans and advances not paid for more than   90 days (d)  CRR (iv)  The percentage of net demand and time   liabilities to be kept in the form of liquid assets.
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Which of the following sets of statements most appropriately conveys the process of adjustment? Choose from the code for your answer : (a) Adjustment is a two-dimensional process. (b) Mental health of a person is indicative of his/her adjustment. (c) Adjustment implies satisfying one’s needs in a given environment. (d) Conflicts and tensions are a part of the adjustment process. (e) Adjustment is the goal of life. (f) Adjustment and mental health are one and the same thing. Code :
Consider the true statements regarding the Statutory Liquidity Ratio (SLR) in terms of Indian Banking. A) SLR has to be kept by banks in form of cash, gold, or other securities. B) Banks earn interest for deposits in form of SLR.
Consider the following pairings of Non-Performing Assets (NPA) classification in India with their descriptions: 1. Substandard assets : Assets which have remained NPAs for a period less than or equal to 12 months. 2. Doubtful assets : Assets which have remained in the substandard category for a period of 12 months. 3. Loss assets : Assets which are considered uncollectible and of such little value that their continuance as a bankable asset is not warranted, although there may be some salvage or recovery value. Which out of the above pairings are correct?
The question given below consists of a statement, followed by three arguments I, II and III. You have to decide which of the arguments is/are ‘strong’ arguments, is/are ‘weak’ arguments and accordingly choose your answer from the alternatives given below each question. Statement: Over the past five decades, term deposits in banks have emerged as the primary instrument of financial savings for the average Indian after former premier Indira Gandhi embarked on a mission to nationalise the lenders - 14 in the first tranche - on a rainy afternoon in July 1969. Coming with an unsaid sovereign guarantee of sorts, fixed deposits (FDs) seemingly offered investors liquidity - and safety - as nationalisation sought, in part, to arrest the 40-odd bank failures a year.  Now, however, deposits must burnish their allure to retain leadership status in an increasingly crowded financial marketplace that offers choice. Why? Arguments: I. If FDs are giving 7.5% and the effective tax rate is 10%, one gets close to 5-5.2% return. Similarly, in the case of FMP, if the rate is 7.5%, effective taxation comes to 10%, one gets 6.75%. It is higher than the effective returns on bank deposits.  II. People are becoming aware of more asset classes that offer better returns, and the quest for such assets became more pronounced after interest rates fell substantially over the past four years.  III. Savers are looking at mutual funds and provident funds for the higher return. 
Liquidity Adjustment facility by RBI allows a. RBI to manage market liquidity on a daily basis. b. Transmit interest rate signals to the market. Which of the statements given above is/are correct?
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