A proportion of the total deposits and reserves of the commercial banks is to be kept with the central bank (RBI). Which one of the following represents this proportion?
Options
AStatutory Liquidity Ratio
BCash Reserve Ratio
CMinimum Reserve System
DReverse Repo Rate
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Correct Answer
BCash Reserve Ratio
Model Answer
Hence, option B is correct.
Additional Information
Statutory Liquidity Ratio
It is the amount of money that the banks are required to maintain with themselves as liquid assets, i.e. cash, gold, approved securities. etc.
Banks usually earn interest as a return on the funds kept as SLR.
It is maintained by Banks themselves.
Reverse Repo Rate
It is the rate at which RBI borrows money from banks.
It is lower than the repo rate.
It is used to manage cash flow in the market.
Table summarising the Cash Reserve Ratio: what it is, its use, form, return, who maintains it and how the RBI raises or lowers it.
