SLR stands for:
Options
AStatutory Liquidity Ratio
BStandard Liquidity Ratio
CState Liquidity Ratio
DSimple Liquidity Ratio
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Money MarketPYQ - July 2021 (Inter)Question 156 of 20
All Questions Correct Answer
✅ Option a — Statutory Liquidity Ratio
All Options:
- AStatutory Liquidity Ratio
- BStandard Liquidity Ratio
- CState Liquidity Ratio
- DSimple Liquidity Ratio
Detailed Solution & Explanation
To determine the correct answer, let's break down the concept of SLR.
• The term SLR is commonly used in the context of banking and monetary policy, referring to the minimum amount of liquid assets that commercial banks must hold.
• This requirement is imposed by the central bank to ensure that banks have sufficient liquidity to meet their short-term obligations.
• The correct term for this requirement is Statutory Liquidity Ratio, which is a regulatory requirement that banks must maintain a certain level of liquidity.
• This concept is based on the principle of maintaining financial stability and preventing bank runs, as stated in various economic theories and laws, such as the Banking Regulation Act.
The correct answer is right because it accurately reflects the definition and purpose of the concept.
• In contrast, options like Standard Liquidity Ratio and Simple Liquidity Ratio are incorrect because they do not accurately reflect the regulatory nature of the requirement.
• State Liquidity Ratio is also incorrect because it implies a geographic or regional scope, which is not relevant to the concept of SLR.
About This Chapter: Money Market
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Money Demand/Supply, Monetary Policy
This chapter covers the monetary system — how money circulates in the economy. Topics include Demand for Money, Supply of Money, Monetary Policy instruments (Repo Rate, CRR, SLR, Open Market Operations), and the role of the Reserve Bank of India in controlling inflation and managing the economy.
View Official ICAI SyllabusExam Strategy Tip
Memorize the RBI's monetary policy instruments and their impacts. Questions often ask about the effect of changing CRR or Repo Rate on money supply.
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